**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB**


(Mark
      One)


þ
            
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**




**For
      the quarterly report period ended September 30, 2006**


o
            
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**




**For
      the transition period from__________** **to__________**




**Commission
      File Number: 333-109903**




**SUB-URBAN
      BRANDS, INC.**


(Exact
      name of small business issuer specified in its charter)


**NEVADA**
            
            **47-0926492**(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                Employer Identification No.)




**8723
      Bellanca Ave, Bldg A, Los Angeles, CA 90045**


(Address
      of Principal Executive Offices)





**(310) 670-0132**


Issuer’s
      telephone number, including area code





**2222
      E. Washington Blvd. Suite B, Los Angeles, CA 90021**


(Former
      name, former address and former fiscal year, if changed since last report)




Check
      whether the issuer (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
      preceding 12 months (or for such shorter period that the registrant was
      required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days.


Yes þ No o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes
o No þ





As
      of
      November 20, 2006 there were 49,973,358 common shares outstanding.





TABLE
        OF
        CONTENTS


PART
                I — FINANCIAL INFORMATIONITEM
                1. CONSOLIDATED FINANCIAL STATEMENTS
            
            3ITEM
                2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
                OPERATION
            
            36ITEM
                3. CONTROLS AND PROCEDURES
            
            51PART
                II — OTHER INFORMATIONITEM
                1. Legal Proceedings
            
            52ITEM
                2. Unregistered Sales of Equity Securities and Use of Proceeds
            
            52ITEM
                3. Defaults Upon Senior Securities
            
            53ITEM
                4. Submission of Matters to a Vote of Security Holders
            
            53ITEM
                5. Other Information
            
            53ITEM
                6. Exhibits
            
            53SIGNATURES
            
            54Exhibit
                4.1Exhibit
                4.2Exhibit
                4.3Exhibit
                4.4Exhibit
                4.5Exhibit
                31.1Exhibit
                31.2Exhibit
                32.1Exhibit
                32.2




2


**SUB-URBAN BRANDS, INC. AND SUBSIDIARY**


**FORMERLY
      KNOWN AS DP&D, INC.**


**CONSOLIDATED
      BALANCE SHEET**


**AS
      OF SEPTEMBER 30, 2006**


**September
                  30, 2006****(Unaudited)**ASSETSCurrent
                  AssetsCash
                  and cash equivalents
              
              $
              7,223Accounts
                  receivable, net of allowance for doubtful accounts of $2,706
              
              
              51,647Inventory,
                  net of inventory reserve of $29,528
              
              
              224,942Prepaid
                  expenses and advances
              
              
              58,013Deferred
                  financing fees
              
              
              177,018Total
                  Current Assets
              
              
              518,843Property
                  and Equipment (net of accumulated depreciation of $13,330
              
              
              22,290Deposits
              
              
              29,093Total
                  Assets
              
              $
              570,226





See
      accompanying notes.


3


**SUB-URBAN
      BRANDS, INC. AND SUBSIDIARY**


**FORMERLY
      KNOWN AS DP&D, INC.**


**CONSOLIDATED
      BALANCE SHEET**


**AS
      OF SEPTEMBER 30, 2006**





LIABILITIES
      AND SHAREHOLDERS’ DEFICIT





**September
                30, 2006****(Unaudited)**Current
                LiabilitiesAccounts
                payable
            
            $
            463,586Advances
                on pledged receivables
            
            
            7,924Accrued
                salary, and benefits
            
            
            214,074Accrued
                expenses
            
            
            16,147Accrued
                interest
            
            
            226,704Warrant
                liabilities
            
            
            1,041,566Convertible
                secured notes payable - net of unamortized debt discounts
            
            
            439,200Convertible
                notes payable - net of unamortized debt discounts
            
            
            1,477,191Convertible
                note payable - conversion feature derivative liability
            
            
            714,348Notes
                payable
            
            
            439,006Total
                Current Liabilities
            
            
            5,039,746Total
                Liabilities
            
            
            5,039,746Shareholders’
                deficitPreferred
                Stock, $0.001 par value, 10 million shares authorized; none issued
                or
                outstanding
            
            
            —Common
                stock, $0.001 par value (190,000,000 shares authorized; 49,405,427
                shares
                issued and outstanding at September 30, 2006)
            
            
            49,405Additional
                paid-in-capital
            
            
            6,233,204Accumulated
                deficit
            
            
            (10,752,129
            )Total
                Shareholders’ Deficit
            
            
            (4,469,520
            )Total
                Liabilities and Shareholders’ Deficit
            
            $
            570,226





See
      accompanying notes.


4


**SUB-URBAN
      BRANDS, INC. AND SUBSIDIARY**


**FORMERLY
      KNOWN AS DP&D, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**THREE
      AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**


**(UNAUDITED)**




**Three
                  Months Ended**
                **September
                  30,**
              
              **Nine
                  Months Ended**
                **September
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Revenue
              
              $
              54,222
              
              $
              22,334
              
              $
              79,259
              
              $
              126,300Cost
                  of revenue
              
              
              (48,339
              )
              
              (16,054
              )
              
              (60,942
              )
              
              (96,794
              )Gross
                  profit
              
              
              5,883
              
              
              6,280
              
              
              18,317
              
              
              29,506Operating
                  ExpensesSelling
                  expense
              
              
              222,290
              
              
              70,383
              
              
              611,468
              
              
              220,067Product
                  development
              
              
              112,630
              
              
              40,622
              
              
              228,273
              
              
              107,801General
                  and administrative expense
              
              
              876,643
              
              
              405,958
              
              
              2,426,471
              
              
              978,246Total
                  Operating Expenses
              
              
              1,211,563
              
              
              516,963
              
              
              3,266,212
              
              
              1,306,114Loss
                  from operations
              
              
              (1,205,680
              )
              
              (510,683
              )
              
              (3,247,895
              )
              
              (1,276,608
              )Other
                  Income (Expense)Interest
                  expense
              
              
              (1,621,214
              )
              
              (48,470
              )
              
              (2,662,191
              )
              
              (127,494
              )Accretion
                  of Series A Preferred Stock to redemption value premium
              
              
              —
              
              
              (67,713
              )
              
              
              
              
              (203,138
              )Gain
                  on conversion of mandatorily redeemable preferred stock
              
              
              —
              
              
              
              
              
              406,275
              
              
              —Loan
                  guarantee
              
              
              (54,628
              )
              
              —
              
              
              (327,768
              )
              
              —Amortization
                  of deferred financing fees
              
              
              (113,176
              )
              
              —
              
              
              (113,176
              )
              
              —Gain
                  due to change in warrant liability
              
              
              303,434
              
              
              —
              
              
              303,434
              
              
              —Gain
                  (loss) due to change in conversion feature liability
              
              
              515,412
              
              
              (18,577
              )
              
              233,622
              
              
              (66,878
              )Total
                  Other Income (Expense)
              
              
              (970,172
              )
              
              (134,760
              )
              
              (2,159,804
              )
              
              (397,510
              )Provision
                  for income taxes
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  Loss
              
              
              (2,175,852
              )
              
              (645,443
              )
              
              (5,407,699
              )
              
              (1,674,118
              )Loss
                  per weighted average share of commonstock
                  outstanding - basic and diluted
              
              $
              (0.04
              )
              $
              (0.02
              )
              $
              (0.14
              )
              $
              (0.07
              )Weighted
                  average shares outstanding - basic and diluted
              
              
              49,287,580
              
              
              26,150,004
              
              
              39,102,611
              
              
              25,604,739


**Three
                  months ended**
                **September
                  30,**
              
              **Nine
                  months ended**
                **September
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Includes
                  the following amounts related to share-based compensation expense
                  for
                  stock options:General
                  and administrative
              
              $
              184,390
              
              $
              98,484
              
              $
              525,879
              
              $
              219,234—
              
              
              
              
              
              —Total
              
              $
              184,390
              
              $
              94,484
              
              $
              525,879
              
              $
              219,234





See
      accompanying notes.


5


**SUB-URBAN
      BRANDS, INC. AND SUBSIDIARY**


**FORMERLY
      KNOWN AS DP&D, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**NINE
      MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**





**Nine
                months ended September 30, 2006**
            
            **Nine
                months ended September 30, 2005**Cash
                flows from operating activities:Net
                loss
            
            $
            (5,407,699
            )
            $
            (1,674,118
            )Adjustments
                to reconcile net loss to net cashprovided
                by (used for) operating activities:Depreciation
                and amortization
            
            
            4,101
            
            
            2,928Provision
                for doubtful accounts
            
            
            2,297
            
            
            (1,223
            )Provision
                for inventory markdowns
            
            
            52,500
            
            
            —Preferred
                stock redemption accretion
            
            
            (406,275
            )
            
            203,138Loss
                on notes payable conversion price
            
            
            107,732
            
            
            66,878Amortization
                of discount and conversion features on notes payable
            
            
            2,447,777
            
            
            16,870Option
                compensation expense
            
            
            525,879
            
            
            219,234Issuance
                of warrants for services
            
            
            403,542
            
            
            77,575Issuance
                of warrants for loan extension
            
            
            113,176
            
            
            —(Gain)
                / loss on warrant liability
            
            
            (303,434
            )
            
            —(Gain)
                / loss on conversion features
            
            
            (514,341
            )
            
            —Issuance
                of common stock for services
            
            
            —
            
            
            55,000Issuance
                of warrants and common stock for loan guarantee
            
            
            327,768Preferred
                stock beneficial conversion adjustments
            
            
            172,988
            
            
            —Changes
                in operating assets and liabilities:(Increase)
                decrease in accounts receivable
            
            
            (46,189
            )
            
            6,776(Increase)
                decrease in inventory
            
            
            (225,767
            )
            
            71,091(Increase)
                decrease in prepaid expenses and other current assets
            
            
            (49,343
            )
            
            (4,393
            )(Increase)
                in deposits
            
            
            (22,143
            )
            
            (1,600
            )(Increase)
                in other receivables
            
            
            (8,633
            )
            
            —Increase
                in accounts payable
            
            
            166,944
            
            
            77,967Increase
                in accrued salary, and related benefits
            
            
            46,101
            
            
            87,747Increase
                (decrease) in accrued expenses
            
            
            3,161
            
            
            800Increase
                in accrued interest
            
            
            183,709
            
            
            110,500Net
                cash used for operating activities
            
            
            (2,426,149
            )
            
            (684,830
            )Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            (23,100
            )
            
            —Net
                cash used for investing activities
            
            
            (23,100
            )
            
            —Cash
                flows from financing activities:Proceeds
                from secured credit financing
            
            
            7,805
            
            
            15,932Proceeds
                from secured convertible notes payable
            
            
            750,000
            
            
            —Proceeds
                from convertible notes payable
            
            
            1,824,600
            
            
            668,100Payments
                on convertible notes payable
            
            
            (427,800
            )
            
            (35,000
            )Proceeds
                from non-convertible notes payable
            
            
            300,000Proceeds
                from notes payable to related party
            
            
            
            
            
            32,065Payments
                on notes payable to related party
            
            
            
            
            
            (750
            )Net
                cash provided by financing activities
            
            
            2,454,605
            
            
            680,347Net
                increase (decrease) in cash and cash equivalents
            
            
            5,356
            
            
            (4,483
            )Cash
                and cash equivalents, beginning of period
            
            
            1,867
            
            
            12,582Cash
                and cash equivalents, end of period
            
            $
            7,223
            
            $
            8,099**Supplemental
                disclosures of cash flow information:**Cash
                paid during the period for:Interest
            
            $
            18,520
            
            $
            307Taxes
            
            $
            —
            
            $
            —





See
      accompanying notes.


6





**SUB-URBAN
      BRANDS, INC. AND SUBSIDIARY**


**FORMERLY
      KNOWN AS DP&D, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**NINE
      MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**





(Continued)


**Supplemental
      disclosures of non-cash transactions:**





During
      the nine months ended September 30, 2006, the Company entered into the following
      non-cash transactions:





·
            $1,076,101
                for the conversion of 2,167,910 shares of preferred stock for 2,859,863
                shares of its restricted common stock





·
            $965,866
                for the conversion of convertible notes payable plus accrued interest
                into
                3,232,065 share of its restricted common
                stock




·
            $250,000
                for the issuance of 1,000,000 shares of its restricted common stock
                and
                $77,768 for 1,000,000 warrants for a loan guarantee·
            $290,194
                for the issuance of 1,850,000 warrants for a loan
                extension





·
            $495,114
                for the issuance of 4,495,625 warrants for services·
            Issuance
                of 14,500,000 shares of common stock as a result of the reverse merger
                transaction





During
      the nine months ended September 30, 2005, the Company entered into the following
      non-cash transactions:





·
            $107,364
                for the issuance of 1,977,468 shares common stock for consulting
                services·
            $223
                for this issuance of 400,000 warrants for
                services




See
      accompanying notes.


7





**SUB-URBAN
      BRANDS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


SEPTEMBER
      30, 2006





**1.**  **Significant
      Accounting Policies**





Description
      of the Company





**Formation
      and Business of the Company:**





Sub-Urban
      Brands, Inc. (“SUB”) was incorporated in Nevada on March 1, 2001 under the name
      DP&D, Inc. (“DPD”). On May 11, 2006, Sub-Urban Brands, Inc., (formerly known
      as "DP&D, Inc.) acquired all the outstanding shares of Sub-Urban Industries,
      Inc. ("SUI"), pursuant to a share exchange agreement (the “Share Exchange
      Agreement”) in exchange for 31,673,363 restricted shares of its common stock in
      a reverse merger (the "Merger"). Pursuant to the Share Exchange Agreement,
      the
      shareholders of SUI immediately prior to the Merger received one share of DPD
      common stock for each share of Company common stock they held, or an aggregate
      of 31,673,363 **** shares
      of
      DPD common stock. These shares represented approximately 68.6% of the
      46,173,363 shares of DPD common stock outstanding immediately following the
      Merger. The acquisition has been accounted for as a reverse merger
      (recapitalization) with SUI deemed to be the accounting acquirer. Accordingly,
      the historical financial statements presented herein are those of SUI, as
      adjusted to give effect to any difference in the par value of the issuer's
      and
      the accounting acquirer's stock with an offset to capital in excess of par
      value. The retained earnings of the accounting acquirer have been carried
      forward after the acquisition and SUI's basis of its assets and liabilities
      were
      carried over in the recapitalization. Operations prior to the business
      combination are those of the accounting acquirer.





For
      purposes of these financial statements, references to the "Company" shall mean
      Sub-Urban Brands, Inc., and its wholly owned legal subsidiary SUI.





SUI,
      a
      privately-held California corporation, was incorporated March 24, 2003 to
      develop and promote several lifestyle apparel brands. Sub-Urban designs, sells
      and markets apparel (Shirts, Outerwear, Sweatshirts, T-shirts and Accessories)
      and pursues intellectual property to develop for the retail apparel and
      accessories market. Sub-Urban leads its product line with the Mash Culture
      Lab Ô ,
      and
      WHITEBOY Ô brands,
      which has been adopted in the “urban”, “street” and “board” apparel markets.
      Production of products are outsourced.





**Merger
      of Sub-Urban Brands, Inc, and Sub-Urban Industries, Inc.:**





SUI
      completed a reverse merger transaction on May 11, 2006 with DP&D, Inc., a
      Nevada corporation formed on March 1, 2001. As of May 11, 2006, the effective
      date of the merger, DPD had no amount of assets and liabilities. Effective
      with
      the merger, the directors and management of SUI became the directors and
      management of DPD. SUI has been considered the acquirer in this transaction,
      frequently referred to as a “reverse merger” of a shell company, and accounted
      for as a recapitalization. Accordingly, no goodwill or other adjustment in
      basis
      of assets is recorded. The shares of the shell, the legal surviving entity,
      are
      treated as issued as of the date of the transaction, and the shares held by
      the
      controlling shareholders after the transaction, are treated as outstanding
      for
      the entirety of the reporting periods. DPD was formed as a full-service provider
      of consulting services for weddings, holy unions and anniversaries. It had
      not
      commenced business operations as of May 11, 2006, and had no assets or
      liabilities. Pursuant to the reorganization, the controlling shareholders of
      SUI
      became DPD’s controlling shareholders. On April 27, 2006, the Company changed
      its corporate name from DPD, Inc. to Sub-Urban Brands, Inc., and its trading
      symbol to SUUB.OB. SUI currently remains a wholly owned subsidiary of Sub-Urban
      Brands, Inc. The Company stock is quoted and traded on the NASDAQ OTC Bulletin
      Board.




8




Basis
      of Presentation





The
      accompanying unaudited interim consolidated financial statements have been
      prepared in accordance with generally accepted accounting principles in the
      United States of America and the rules and regulations of the Securities and
      Exchange Commission for interim financial information filed on Form 10QSB.
      Accordingly, they do not include all the information and footnotes necessary
      for
      a comprehensive presentation of financial position and results of operations.
      It
      is management's opinion, however, that all adjustments (consisting of normal
      recurring adjustments) have been made which are necessary for a fair financial
      statement presentation. The results for the interim period are not necessarily
      indicative of the results to be expected for the year. These unaudited interim
      financial statements should be read in conjunction with the Current Report
      on
      Form 8-K, dated May 15, 2006 file #06843060, containing audited financial
      statements of the accounting acquirer (SUI) as of and for the two years ended
      December 31, 2005 and 2004, and the following amendments to that Form 8K, as
      form 8K/A amendment #1, filed June 23, 2006 file #06922265, and Form 8K/A
      amendment #2 filed June 26, 2006 file #06924643.





**Basis
      of Consolidation**





The
      consolidated financial statements include the accounts of Sub-Urban Brands,
      Inc., and its wholly owned subsidiary Sub-Urban Industries, Inc. All significant
      inter-company balances and transactions have been eliminated.





Use
      of
      Estimates





The
      preparation of these financial statements requires the Company to make estimates
      and judgments that affect the reported amounts of assets, liabilities, revenues
      and expenses. The Company evaluates its estimates on an on-going basis,
      including those related to provisions for doubtful accounts, reserve for charge
      backs, inventories, derivatives, valuation of stock, valuation of options,
      analysis of deferred taxes and provision for income taxes, contingencies and
      litigation. The Company bases its estimates on historical experience and on
      various other assumptions that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying values of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates.





Cash
      and Cash Equivalents





For
      purposes of the statement of cash flows, cash equivalents include all highly
      liquid debt instruments with original maturities of three months or less which
      do not secure any corporate obligations.





9




Fair
      Value of Financial Instruments





The
      Company’s financial instruments, none of which are held for trading, are cash
      and cash equivalents, accounts receivable, other receivables, accounts payable,
      notes payable and long-term debt (mandatorily redeemable preferred stock).
      The
      recorded values of cash and cash equivalents, accounts receivable, and accounts
      payable approximate their fair values based on their short-term nature. The
      recorded values of notes payable and debt approximate their fair values, as
      the
      interest approximates market rates and they are all classified as current.





Accounts
      Receivable





The
      Company extends credit to customers based upon an evaluation of the customer’s
      financial condition and credit history and generally requires no collateral.
      Management performs regular evaluations concerning the ability of its customers
      to satisfy their obligations and records a provision for doubtful accounts
      based
      on these evaluations. The Company’s allowance for doubtful accounts was $2,706
      at September 30, 2006. In September 2006, the Company obtained a new secured
      lending facility with a $200,000 limit from a financial institution, American
      Business Finance LLC (ABF). Under the terms of the agreement, the Company
      assigns most of its trade receivables, whereby ABF advances up to 80% of the
      assigned receivables, but retains full right of recourse to have the Company
      repurchase any receivables that remain unpaid 90 days from date of invoice.
      The
      Company’s borrowings are secured by the underlying assigned trade receivables,
      as well as by a general grant of security interest in the Company’s receivables,
      inventories, equipment, furniture, fixtures, intangibles and various other
      assets. Gross receivables transferred to the financial institution amounted
      to
      $9,847 in the period ending September 30, 2006. The receivables are subject
      to
      full recourse; therefore, the transaction does not qualify as a sale under
      the
      terms of Financial Accounting Standards Board Statement No. 125 (Accounting
      for
      Transfers and Servicing of Financial Assets and Extinguishments of Liabilities).





At
      September 30, 2006, there were $9,847 of receivables that were assigned and
      collateralized under this financing agreement.




Inventory





Inventory
      is valued at the lower of cost or market, cost being determined by the first-in,
      first-out method. The Company’s inventory consists of finished goods, raw
      materials and work-in-process. Raw materials, work-in-process, and finished
      goods inventories were $1,535, $18,957, and $233,978, respectively at September
      30, 2006. The Company continually evaluates its inventories by assessing slow
      moving products. Market value of inventory is estimated based on historical
      sales, current demand, inventory levels and an evaluation of current market
      trends and economic conditions. The reserve for lower-of-cost-or-market
      adjustments was $29,528 at September 30, 2006.





Deferred
      Financing Costs





Costs
      relating to obtaining debt financing are capitalized and amortized over the
      term
      of the related debt using the effective interest method. When a loan is paid
      in
      full, any unamortized financing costs are removed from the related accounts
      and
      charged to operations.





10




**Convertible
      Debt Financing and Derivative Liabilities**




Convertible
      Debt Financing and Derivative Liabilities





The
      Company has issued convertible debt securities with non-detachable conversion
      features and detachable warrants. The Company accounts for such securities
      in
      accordance with Emerging Issues Task Force Issue Nos. 98-5, 00-19, 00-27, 05-02,
      05-04 and 05-08, and Statement of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging Activities” as amended (“SFAS
      133”). In accordance with
      SFAS 133, holder's
      conversion right provision, potential liquidated damages clause, and the reset
      option (collectively, the debt features) contained in the terms governing the
      Notes are not clearly and closely related to the characteristics of the Notes.
      Accordingly, the features qualified as embedded derivative instruments at
      issuance and, because they do not qualify for any scope exception within SFAS
      133, they were required by SFAS 133 to be accounted for separately from the
      debt
      instrument and recorded as derivative financial instruments.





At
      each
      balance sheet date, the Company adjusts the derivative financial instruments
      to
      their estimated fair value and analyzes the instruments to determine their
      classification as a liability or equity.





If
      the
      holders of the Notes and Warrants have registration rights that require the
      Company to file a registration statement with the Securities and Exchange
      Commission to register the resale of the common stock issuable upon conversion
      of the Convertible Notes or the exercise of the Warrants, under EITF No. 00-19, *Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company's Own Stock,* the
      ability to register stock is deemed to be outside of the Company's control.
      Accordingly, the initial fair value of the Warrants and the initial fair value
      of the embedded derivatives (i.e., conversion feature) are recorded as an
      accrued warrant liability and conversion feature liability in the consolidated
      balance sheet, and are marked to market at the end of each reporting period. The
      estimated fair value of the warrants was determined using the Black-Scholes
      option-pricing model.


The
      Financial Accounting Standards Board Emerging Issues Task Force issued EITF
      05-04, "The Effect of a Liquidated Damages Clause on a Freestanding Financial
      Instrument Subject to EITF Issue No. 00-19, Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”.
      Under EITF 05-04, liquidated damages clauses may qualify as freestanding
      financial instruments for treatment as a derivative liability. Furthermore,
      EITF
      05-04 addresses the question of whether a registration rights agreement should
      be combined as a unit with the underlying financial instruments and be evaluated
      as a single instrument. EITF 05-04 doesn’t reach a consensus on this question
      and allows for treatment as a combined unit (Views A and B) as well as separate
      freestanding financial instruments (View C).





In
      conjunction with the issuance of the Company’s senior and convertible debentures
      and the related warrants and registration rights, the Company adopted View
      A of
      EITF 05-04. Accordingly, the registration rights agreements, the warrants
      associated with the senior and convertible debentures, the debentures
      themselves, as well as certain features of the debentures were evaluated if
      they
      are free standing financial instruments. This treatment resulted in
      classification of the warrants and certain features of the debentures as either
      liability or equity while the registration rights agreements and other features
      of the debentures were treated as combined embedded derivative liabilities.
      Derivative liability treatment requires adjusting the carrying value of the
      instrument to its fair value at each balance sheet date and recognizes any
      change since the prior balance sheet date as a component of other
      income/(expense). The recorded value of such derivative liabilities can
      fluctuate significantly based on fluctuations of the market value of the
      underlying securities of the Company, as well as on the volatility of the
      Company’s stock price during the term used for observation and the term
      remaining for the underlying financial instruments. The debt features of the
      debentures and associated warrants previously classified as equity or liability
      are evaluated as a combined unit with the registration rights agreements. This
      combination will result in these instruments being treated as derivative
      liabilities requiring periodic reevaluation of fair value with potentially
      significant fluctuation in fair value from period to period.





11




**Commitments
      and Contingencies**





Legal
      Actions





The
      Company is periodically involved in legal actions and claims that arise as
      a
      result of events that occur in the normal course of operations. The Company
      is
      not currently aware of any formal legal proceedings or claims that the Company
      believes will have, individually or in the aggregate, a material adverse effect
      on the Company's financial position or results of operations.





Comprehensive
      Income (Loss)





Comprehensive
      loss consists of net loss and other gains and losses affecting shareholders’
equity that, under generally accepted accounting principles are excluded from
      net loss in accordance with Statement of Financial Accounting Standards No.
      130,
“Reporting Comprehensive Income.” The Company, however, does not have any
      components of other comprehensive loss as defined by SFAS No. 130 and therefore,
      for the three and nine months periods ended September 30, 2006 and 2005,
      comprehensive loss is equivalent to the Company’s reported net loss.
      Accordingly, a separate statement of comprehensive loss is not presented.





Revenue
      Recognition





The
      Company recognizes revenue upon the delivery of its product to its customers.
      The Company charges shipping and handling costs for inventory and sales items
      to
      cost of sales and inventory. Shipping costs recovered from customers is recorded
      as freight revenue and included in net sales. Revenue is recorded net of an
      allowance for estimated returns, price concessions, and other discounts. Such
      allowance is reflected as a reduction to accounts receivable when the Company
      expects to grant credits for such items; otherwise, it is reflected as a
      liability.





The
      Company recognizes revenue only when all of the following criteria have been
      met:





·
            Persuasive
                evidence of an arrangement exists;





·
            Delivery
                has occurred or services have been rendered;





·
            The
                fee for the arrangement is fixed or determinable; and





·
            Collectibility
                is reasonably assured.





*Persuasive
      Evidence of an Arrangement* —
The
      Company documents all terms of an arrangement in a written contract or purchase
      order approved by the customer, prior to recognizing revenue.





12




*Delivery
      Has Occurred* —
      Products are considered delivered upon delivery to a customer’s designated
      location.





*The
      Fee for the Arrangement is Fixed or Determinable* —
Prior
      to recognizing revenue, the amount is either fixed or determinable under the
      terms of the written contract or purchase order. The amount recognized as
      revenue is negotiated at the outset of the arrangement and is not subject to
      refund or adjustment during the initial term of the arrangement.





*Collectibility
      is Reasonably Assured* —
The
      Company determines that collectibility is reasonably assured prior to
      recognizing revenue. Collectibility is assessed on a customer-by-customer basis
      based on criteria outlined by management. New customers are subject to a credit
      review process, which evaluates the customer’s financial position and ultimately
      its ability to pay. The Company does not enter into arrangements unless
      collectibility is reasonably assured at the outset. Existing customers are
      subject to ongoing credit evaluations based on payment history and other
      factors. If it is determined during the arrangement that collectibility is
      not
      reasonably assured, revenue is recognized on a cash basis.





Advertising





The
      Company expenses advertising costs as incurred, consisting primarily of
      advertising at events, placement in multiple print and internet publications,
      along with design, production and printing costs of sales materials. Advertising
      expense for the nine-months ended September 30, 2006, and 2005 amounted to
      $167,060 and $11,649, respectively.





Stock-
      Based Compensation





*Equity
      Incentive Plan*





The
      Company has an Equity Incentive Plan (“Plan”) under which officers, key
      employees, consultants, and non-employee directors may be granted options to
      purchase shares of the Company’s authorized but un-issued common stock. The
      maximum number of shares of the Company’s common stock available for issuance
      under the Plan at September 30, 2006 is 18,702,965 shares (see Note 10).





Prior
      to
      December 31, 2005, the Company had elected to follow Financial Accounting
      Standards Board Statement No. 123 (Accounting for Stock-Based Compensation)
      in
      accounting for its employee and non-employee stock options. Accordingly, the
      Company determined compensation costs based on the fair value at the grant
      date
      for its stock options using the Black-Scholes valuation method. The
      Black-Scholes option valuation model was developed for estimating the fair
      value
      of traded options that have no vesting restrictions and are fully transferable.
      Because option valuation models require the use of subjective assumptions,
      changes in these assumptions can materially affect the fair value of the
      options. The Company’s options do not have the complete characteristics of
      traded options. The option valuation models do not necessarily provide a
      reliable measure of the fair value of its options (see Note 10). Effective
      January 1, 2006, the Company has adopted the fair value based method of
      accounting prescribed in FASB Statement of Financial Accounting Standards No.
      123 (Accounting *for
      Stock-Based Compensation)* /No.
      123R
      (Share *-Based
      Payment)* for its
      employee stock option plans.




13




Share-based
      Compensation Expense





Effective
      January 1, 2006, the Company adopted the provisions of Statement of Financial
      Accounting Standards No. 123 (revised 2004), Share-Based Payment, or SFAS
      123(R), which requires the measurement and recognition of compensation expense
      for all share-based payment awards made to employees and directors, including
      stock options issued under the New Plan. The financial statements as of
      September 30, 2006 and for the three and nine months ended September 30, 2006,
      reflect the effect of SFAS 123(R). In accordance with the
      modified prospective transition method, the financial statements for prior
      periods have not been restated to reflect, and do not include, the impact of
      minor differences between SFAS 123 and SFAS 123(R). Share-based compensation
      expense recognized is based on the value of the portion of share-based payment
      awards that is ultimately expected to vest. Share-based compensation expense
      recognized in our Unaudited Consolidated Statements of Operations during the
      three and nine months ended September 30, 2006, included compensation expense
      for share-based payment awards granted prior to, but not yet vested as of,
      December 31, 2005 based on the grant date fair value estimated in accordance
      with the provisions of SFAS 123 and compensation expense for the share-based
      payment awards granted subsequent to January 1, 2006 based on the grant date
      fair value estimated in accordance with the provisions of SFAS 123(R). In
      conjunction with the adoption of SFAS 123(R), we elected to attribute the value
      of share-based compensation to expense using the straight-line attribution
      method. Share-based compensation expense related to stock options was $184,390
      and $525,879, before taxes on earnings for the three and nine months ended
      September 30, 2006, respectively. During the three and nine months ended
      September 30, 2005, share-based compensation expense related to stock options
      are recognized under the fair value method in accordance with SFAS 123. See
      Note
      10 to the Consolidated Financial Statements for additional information.





Upon
      adoption of SFAS 123(R), the Company elected to continue valuing the Company’s
      share-based payment awards granted after January 1, 2006 using the Black-Scholes
      option-pricing model, which the Company previously used for the recognition
      of
      compensation expense required under SFAS 123. The Black-Scholes model was
      developed for use in estimating the fair value of traded options that have
      no
      vesting restrictions and are fully transferable. The Black-Scholes model
      requires the input of certain assumptions. The Company’s options have
      characteristics significantly different from those of traded options, and
      changes in the assumptions can materially affect the fair value estimates.
      The
      determination of fair value of share-based payment awards on the date of grant
      using the Black-Scholes model is affected by the stock price as well as the
      input of other subjective assumptions. These assumptions include, but are not
      limited to the expected term of stock options and expected stock price
      volatility over the term of the awards





The
      expected term of stock options represents the weighted-average period the stock
      options are expected to remain outstanding. The expected term is based on the
      observed and expected time to post-vesting exercise and forfeitures of option
      by
      our employees. Upon the adoption of SFAS 123(R), management determined the
      expected term of stock options using the simplified method as allowed under
      SAB107. Prior to January 1, 2006, the Company determined the expected term
      of
      stock options based on the expected life of the option. Upon adoption of SFAS
      123(R), The Company used average historical volatility of two publicly traded
      companies in the apparel business, measured over a period equal to the option
      expected terms in deriving its expected volatility assumption as allowed under
      SFAS 123(R) and SAB 107. Prior to January 1, 2006, the Company had also used
      historical stock price volatility in accordance with SFAS 123 for purposes
      of
      recognizing compensation expense. The risk-free interest rate assumption is
      based upon observed interest rates appropriate for the term of the Company’s
      stock options and warrants. The dividend yield assumption is based on history
      and expectation of dividend payouts.





As
      share-based compensation expense recognized in the Unaudited Consolidated
      Statements of Operations for the three and nine months ended September 30,
      2006,
      is based on awards ultimately expected to vest, it should have been reduced
      for
      estimated forfeitures. However, based on the Company’s relatively short history,
      the Company does not have sufficient forfeitures history. SFAS 123(R) requires
      forfeitures to be estimated at the time of grant and revised, if necessary,
      in
      subsequent periods if actual forfeitures differ from those estimates. As
      required under SFAS 123 for the periods prior to January 1, 2006, the Company
      accounted for forfeitures as they occurred. If factors change and the Company
      will employ different assumptions in the application of SFAS 123(R) in future
      periods, the compensation expense that the Company recorded under SFAS 123(R)
      may differ significantly from what was recorded in the current period. For
      the
      period ending September 30, 2006, the Company had one forfeiture resulting
      in an
      expense adjustment of $10, 432. At September 30, 2006 there is of total
      unrecognized compensation expense related to stock options granted under the
      plan of $629,921. This unrecognized compensation expense is expected to be
      recognized over a weighted average period of 1.4 years.





14




*Warrants*





The
      Company accounts for stock warrants issued to third parties in accordance with
      the provisions of the Emerging Issues Task Force (EITF) Issue No. 96-18, *Accounting
      for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling Goods or Services,* and EITF
      01-9, *Accounting
      for Consideration Given by a Vendor to a Customer (Including a Reseller of
      the
      Vendor’s Products).* Under
      the
      provisions of EITF 96-18, because none of the Company’s agreements have a
      disincentive for nonperformance, the Company records a charge for the fair
      value
      of the portion of the warrants earned from the point in time when vesting of
      the
      warrants becomes probable. Final determination of fair value of the warrants
      occurs upon actual vesting. EITF 01-9 requires that the fair value of certain
      types of warrants issued to customers be recorded as a reduction of revenue
      to
      the extent of cumulative revenue recorded from that customer.





Recent
      Accounting Pronouncements





In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAF No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”.  SFAS No. 155, permits fair value remeasurement for any
      hybrid financial instrument that contains an embedded derivative that otherwise
      would require bifurcation, clarifies which interest-only strips and
      principal-only strips are not subject to the requirements of SFAS No. 133,
      establishes a requirement to evaluate interest in securitized financial assets
      to identify interests that are freestanding derivatives or that are hybrid
      financial instruments that contain an embedded derivative requiring bifurcation,
      clarifies that concentrations of credit risk in the form of subordination are
      not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition
      on the qualifying special-purpose entity from holding a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument.  This statement is effective for all financial
      instruments acquired or issued after the beginning of the Company’s first fiscal
      year that begins after September 15, 2006.





In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets” (“SFAS 156”). SFAS 156 addresses the accounting for recognized servicing
      assets and servicing liabilities related to certain transfers of the servicer’s
      financial assets and for acquisitions or assumptions of obligations to service
      financial assets that do not relate to the financial assets of the servicer
      and
      its related parties. SFAS 156 requires that all recognized servicing assets
      and
      servicing liabilities are initially measured at fair value, and subsequently
      measured at either fair value or by applying an amortization method for each
      class of recognized servicing assets and servicing liabilities. SFAS 156 is
      effective in fiscal years beginning after September 15, 2006. The adoption
      of
      SFAS 156 is not expected to have a material impact on our consolidated financial
      statements.





In
      June
      2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
      in
      Income Taxes—an interpretation of FASB Statement No. 109 (FIN 48). FIN 48
      provides guidance for the recognition, derecognition and measurement in
      financial statements of tax positions taken in previously filed tax returns
      or
      tax positions expected to be taken in tax returns. FIN 48 requires an entity
      to
      recognize the financial statement impact of a tax position when it is more
      likely than not that the position will be sustained upon examination. If the
      tax
      position meets the more-likely-than-not recognition threshold, the tax effect
      is
      recognized at the largest amount of the benefit that is greater than fifty
      percent likely of being realized upon ultimate settlement. The Corporation
      will
      be required to adopt FIN 48 as of January 1, 2007, with any cumulative effect
      of
      the change in accounting principle recorded as an adjustment to opening retained
      earnings. The Corporation is currently evaluating the impact of FIN 48 and
      has
      not yet determined the effect on its earnings or financial position





15




In
      September 2006, the SEC staff issued Staff Accounting Bulletin No. 108 (SAB
      108), “Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements,” which addresses how
      uncorrected errors in previous years should be considered when quantifying
      errors in current-year financial statements. SAB 108 requires companies to
      consider the effect of all carry over and reversing effects of prior-year
      misstatements when quantifying errors in current-year financial statements
      and
      the related financial statement disclosures. SAB 108 must be applied to annual
      financial statements for the first fiscal year ending after November 15, 2006.
      We are currently assessing the impact of adopting SAB 108 but do not expect
      that
      it will have a material impact on our financial condition or results of
      operations.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurement”, (FAS 157). This Standard defines fair value,
      establishes a framework for measuring fair value in generally accepted
      accounting principles and expands disclosures about fair value measurements.
      FAS
      157 is effective for financial statements issued for fiscal years beginning
      after November 15, 2007 and interim periods within those fiscal years. We have
      not determined the effect that the adoption of FAS 157 will have on our
      consolidated results of operations, financial condition or cash flows.





On
      September 29, 2006, the FASB issued SFAS No.158, “Employers’ Accounting for
      Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB
      Statements No. 87, 88, 106, and 132(R).” SFAS No. 158 requires an entity to
      recognize in its statement of financial position the overfunded or underfunded
      status of a defined benefit postretirement plan measured as the difference
      between the fair value of plan assets and the benefit obligation. An entity
      will
      be required to recognize as a component of other comprehensive income, net
      of
      tax, the actuarial gains and losses and the prior service costs and credits
      that
      arise pursuant to FASB Statements No. 87, “Employers’ Accounting for Pensions”
and No. 106, “Employers’ Accounting for Postretirement Benefits Other Than
      Pensions.”  Furthermore, SFAS No. 158 requires that an entity use a plan
      measurement date that is the same as its fiscal year-end. An entity will be
      required to disclose additional information in the notes to financial statements
      about certain effects on net periodic benefit cost in the upcoming fiscal year
      that arise from delayed recognition of the actuarial gains and losses and the
      prior service costs and credits. The requirement to recognize the funded status
      of a defined benefit postretirement plan and the related disclosure requirements
      is effective for fiscal years ending after December 15, 2006. The requirement
      to
      change the measurement date to the year-end reporting date is for fiscal years
      ending after December 15, 2008. We do not anticipate this statement will have
      any impact on our results of operations or financial condition.





**2.**  **Liquidity
      and Capital Resources**





The
      accompanying financial statements have been prepared on a going-concern basis,
      which contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. The Company incurred net losses of $5,407,699
      and $1,674,118 for the nine-months ended September 30, 2006 and 2005,
      respectively, and had negative operating cash flows of $2,426,149 and
      $684,830 for the respective periods. The Company incurred net losses of
      $2,641,125, for the year ended December 31, 2005, and had negative operating
      cash flows of $914,598 for the period. These factors raise substantial doubt
      about the Company’s ability to continue as a going concern. In view of the
      matters described above, recoverability of a major portion of the recorded
      asset
      amounts shown in the accompanying balance sheets is dependent upon the Company’s
      ability to generate sufficient sales volume to cover its operating expenses
      and
      to raise sufficient capital to meet its payment obligations. Management is
      taking action to address these matters, which include:




16




·
            The
                Company is seeking investment capital through bridge financing and
                a
                private placement offering.





·
            The
                Company is developing new customers and sales channels for development
                and
                commercialization of MASH CULTURE LABÔand
                the WHITEBOY®brand
                of products.





·
            Announcement
                of two non-binding letters of intent for the acquisition of two companies,
                each with established brands and revenues. The acquisition of these
                two
                entities is dependent upon the Company obtaining a significant amount
                of
                new capital financing.





Management
      plans to obtain revenues from product sales, but as of September 30, 2006,
      there
      were no significant commitments for purchases of any of the WHITEBOY Ò or
      the
      recently launched MASH CULTURE LAB Ô products.
      In the absence of significant sales and profits, the Company seeks to raise
      additional funds to match its working capital requirements.





Historically,
      management has been able to raise additional capital. Subsequent to September
      30, 2006, the Company obtained an additional $500,000 in capital. The proceeds
      were used for working capital and design and production for the 2007 MASH
      CULTURE LAB Ô product-line.
      The financial statements do not include any adjustments relating to the
      recoverability and classification of recorded asset amounts, or amounts and
      classification of liabilities that might be necessary should the Company be
      unable to continue in existence.





The
      successful outcome of future activities cannot be determined at this time and
      there is no assurance that if achieved, the Company will have sufficient funds
      to execute its intended business plan or generate positive operating results.





In
      an
      effort to address the above issues, the Company is focused on continuing its
      revenue growth and raising additional capital. Although the Company believes
      that it will obtain the additional financing, there is no assurance that such
      financing will be available in the amount or on the terms necessary to sustain
      the Company’s operations.





Additionally,
      The Company is a specialty urban apparel brand of fashionable and contemporary
      apparel and accessory items designed for consumers with a young, active
      lifestyle. The Company’s success is largely dependent on its ability to gauge
      the fashion tastes of its customers and to provide merchandise that satisfies
      customer demand. The Company’s failure to anticipate, identify, or react to
      changes in fashion trends could adversely affect its results of operations.





**3.**  **Basic
      and Diluted Loss Per Share**





In
      accordance with SFAS No. 128, “Earnings Per Share,” the basic loss per share is
      computed by dividing the loss attributable to common stockholders by the
      weighted average number of common shares outstanding during the period. Basic
      net loss per share excludes the dilutive effect of stock options or warrants
      and
      convertible notes. Diluted net loss per share was the same as basic net loss
      per
      share for all periods presented, since the effect of any potentially dilutive
      securities is excluded, as they are anti-dilutive due to the Company’s net
      losses.




17




The
      following table sets forth the computation of basic and diluted net loss per
      common share:


**Three
                  months ended**
              
              **Nine
                  months ended****September
                  30,**
              
              **September
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**NumeratorNet
                  loss available to common shareholders
              
              $
              (2,175,852
              )
              $
              (645,443
              )
              $
              (5,407,699
              )
              $
              (1,674,118
              )DenominatorWeighted
                  average common shares outstanding
              
              
              49,287,580
              
              
              26,150,004
              
              
              39,102,611
              
              
              25,604,739Total
                  shares, basic
              
              
              49,287,580
              
              
              26,150,004
              
              
              39,102,611
              
              
              25,604,739Net
                  loss per common share:Basic
                  and diluted
              
              $
              (0.04
              )
              $
              (0.02
              )
              $
              (0.14
              )
              $
              (0.07
              )




18





The
      potential shares, which are excluded from the determination of basic and diluted
      net loss per share as their effect is anti-dilutive, are as follows:




**September
                30, 2006**Secured
              promissory notes convertible to common stock (1)
            
            
            3,136,931Promissory
                Notes convertible to common stock (2)
            
            
            9,479,246Options
                to purchase common stock
            
            
            10,969,752Warrants
                to purchase common stock (3)
            
            
            29,292,870Potential
                equivalent shares excluded
            
            
            52,878,799




(1)
      Consists of secured convertible promissory notes issued in 2006 with a principal
      of $750,000.





(2)
      Consists of convertible promissory notes issued in 2004 with a principal of
      $250,000 with a conversion adjustment feature, convertible into 935,679 shares
      of common stock, and convertible promissory notes with a principal of $2,035,800
      convertible into 8,543,567 shares of common stock.





(3)
      Consists of 943,643 warrants issued in 2003 and 2004 with a conversion
      adjustment feature, convertible into 1,887,284 shares of common stock, and
      warrants convertible into 27,405,585 shares of common stock.


19




**4.**  **Property
      and Equipment**





At
      September 30, 2006, property and equipment consisted of the following:




**September****30,
                  2006**Computers
                  and other equipment
              
              $
              24,292Furniture
                  and fixtures
              
              
              2,379Machinery
                  & equipment
              
              
              8,949Total
                  property and equipment
              
              
              35,620Less:
                  accumulated depreciation
              
              
              (13,330
              )Property
                  and equipment, net
              
              $
              22,290





Depreciation
      expense for the three and nine-months ended September 30, 2006 was $1,937 and
      $4,101, respectively, and is included as a component of general and
      administrative expenses in the accompanying financial statements.


20





**5.**  **** **Notes
      Payable**





Debt
      consists of the following at September 30, 2006 and December 31, 2005:





**September
                30, 2006**Convertible
                notes payable - Secured
            
            $
            750,000Discount
                on convertible notes payable - Secured
            
            
            (310,800
            )Convertible
                notes payable
            
            
            2,285,800Conversion
                price liability
            
            
            49,380Conversion
                features derivative liability
            
            
            714,348Discount
                on convertible notes payable
            
            
            (857,990
            )Convertible
                notes payable - net
            
            
            2,630,738Non-convertible
                notes payable
            
            
            496,394Non-convertible
                note discount and premiums
            
            
            (57,387
            )Non-convertible
                note payable - net
            
            
            439,007Total
                debt
            
            
            3,069,745Less:
                current portion
            
            
            (3,069,745
            )Long-term
                debt, less current portion
            
            $
            —




21





Convertible
      Notes Payable





Schedule
      of Convertible Notes Payable at September 30, 2006


Convertible
                  Notes Payable - Secured
              
              Convertible
                Notes
                  Payable
              
              Total
                  convertible
                Notes
                  PayableBalance
                  at December 31, 2005
              
              $
              0
              
              
              1,733,100
              
              
              1,733,100New
                  financing arrangements
              
              
              750,000
              
              
              1,824,600
              
              
              2,574,600Note
                  conversions to common stock
              
              
              0
              
              
              (844,100
              )
              
              (844,100
              )Note
                  principal repayments
              
              
              0
              
              
              (427,800
              )
              
              (427,800
              )Principal
                  Balance at September 30, 2006
              
              $
              750,000
              
              $
              2,285,800
              
              $
              3,035,800





*Debt
      Issued with Stock Purchase Warrants - Fair Value of Warrants Recorded as a
      Liability*





In
      May
      and June 2006, the Company issued unsecured convertible promissory notes in
      the
      aggregate principal amount of $300,000 (the Notes) and detachable warrants
      to
      purchase the Company's common stock (the Warrants) to qualified buyers and
      accredited investors. The Notes bear interest at a rate of 10%, subject to
      repayment at the earlier of one year or the Company’s consummation of a
      financing of not less than $4,000,000, and are convertible into 1,200,000 shares
      of the Company's common stock at a conversion price of $0.25 per share. The
      holders of the Notes and Warrants have registration rights that require the
      Company to file a registration statement with the Securities and Exchange
      Commission to register the resale of the common stock issuable upon conversion
      of the Notes or the exercise of the Warrants. Under EITF No. 00-19, Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company's Own Stock, the ability to register stock is deemed to be outside
      of
      the Company's control. Accordingly, the initial fair value of the Warrants
      was
      recorded as an accrued warrant liability in the consolidated balance sheet,
      and
      is marked to market at the end of each reporting period. The conversion feature
      represents an embedded derivative that is required to be accounted for apart
      from the underlying Notes. At issuance of the Notes, the debt features had
      an
      estimated initial fair value of $395,751, which was recorded as a derivative
      liability on the consolidated balance sheet. The
      associated Warrants are exercisable for 1,200,000 shares of common stock at
      an
      exercise price of $0.25 per share. The Warrants, which expire three years after
      issuance, were assigned a fair value of $335,712, estimated using the
      Black-Scholes valuation model. The following assumptions were used to determine
      the fair value of the Warrants using the Black-Scholes valuation model: a term
      of three years, risk-free rate of 4.99 to 5.24%, volatility of 43.85%, and
      dividend yield of zero. In
      subsequent periods, if the price of the security changes, the embedded
      derivative financial instrument related to the conversion features will be
      adjusted to the fair value with the corresponding charge or credit to Other
      Expense or Income. The
      discounts on the Notes for the beneficial conversion feature and the Warrants
      are being amortized to interest expense, using the effective interest method,
      over the term of the Notes. Total interest expense recognized relating to the
      beneficial conversion feature and the Warrants discount was $441,765 during
      the
      3 month period ended June 30, 2006, and $75,000 for the three month period
      ended
      September 30, 2006.





In
      the
      three month period ending September 30, 2006, the Company issued additional
      unsecured promissory notes in the aggregate principal amount of $550,000 (the
      Notes) and warrants to purchase the Company's common stock (the Warrants) to
      qualified buyers and accredited investors. The Notes bear interest at a rate
      of
      10%, subject to repayment at the earlier of one year or the Company’s
      consummation of a financing of not less than $4,000,000, and are convertible
      into 2,200,000 shares of the Company's common stock at a conversion price of
      $0.25 per share. The
      holders of the Notes and Warrants have registration rights that require the
      Company to file a registration statement with the Securities and Exchange
      Commission to register the resale of the common stock issuable upon conversion
      of the Notes or the exercise of the Warrants. Under EITF No. 00-19, Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company's Own Stock, the ability to register stock is deemed to be outside
      of
      the Company's control. Accordingly, the initial fair value of the Warrants
      was
      recorded as an accrued warrant liability in the consolidated balance sheet,
      and
      is marked to market at the end of each reporting period. The conversion feature
      represents an embedded derivative that is required to be accounted for apart
      from the underlying Notes. At issuance of the Notes, the debt features had
      an
      estimated initial fair value of $832,959, which was recorded as a derivative
      liability on the consolidated balance sheet.




22




The
      associated Warrants are exercisable for 2,200,000
      shares of common stock at an exercise price of $0.25 per share. The Warrants,
      which expire three years after issuance, were assigned an initial fair value
      of
      $669,238, estimated using the Black-Scholes valuation model. The following
      assumptions were used to determine the fair value of the Warrants using the
      Black-Scholes valuation model: a term of three years, risk-free rate of 4.94
      to
      5.15%, volatility of 45.46%, and dividend yield of zero. In
      subsequent periods, if the price of the security changes, the embedded
      derivative financial instrument related to the conversion features will be
      adjusted to the fair value with the corresponding charge or credit to Other
      Expense or Income.The
      discounts on the Notes for the beneficial conversion feature and the Warrants
      are being amortized to interest expense, using the effective interest method,
      over the term of the Notes. Total interest expense recognized relating to the
      beneficial conversion feature and the Warrants discount was $1,401,890 for
      the
      three month period ended September 30, 2006.




At
      September 30, 2006, the above issuances of warrants in May, June and in the
      three month period ending September 30, 2006 were marked to market with a
      decrease in the warrant liability and a non-cash gain of $506,163. Fees for
      this
      financing included a cash fee of $70,000 and the issuance of 3 year warrants
      to
      purchase 280,000 shares of the Company’s common stock at an exercise price of
      $0.40 per share, plus legal and administrative fees related to this financing
      of
      approximately $7,500. The Company used the cash proceeds for working capital
      needs.




The
      recorded value of the debt features related to the Notes can fluctuate
      significantly based on fluctuations in the fair value of the Company’s common
      stock, as well as in the volatility of the stock price during the term used
      for
      observation and the term remaining for the warrants.





The
      significant fluctuations can create significant income and expense items on
      the
      financial statements of the Company.




*Conventional
      Convertible Debt Issued with Stock Purchase*





In
      the
      nine month period ending June 30, 2006, the Company issued $2,024,600 of new
      convertible securities in private placements to qualified buyers and accredited
      investors investment units consisting of notes and warrants. Pursuant to
      guidance in EITF -05-02, these new convertible securities were deemed to be
      conventional. The fair value of the warrants at the time of issuance, which
      was
      determined using the Black-Scholes option-pricing model, was recorded as
      additional paid-in capital and reduced the carrying value of the Notes. The
      discount on the Notes is being amortized to interest expense over the term
      of
      the Notes.





a)
      In
      January 2006, a convertible note financing arrangement in the amount of $25,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in March
      2007, and in connection with this financing issued a 1 year warrant for the
      purchase of 100,000 shares at a price of $0.25. The note plus accrued interest
      was repaid in February 2006.




23




b)
      In
      January 2006, a convertible note financing arrangement in the amount of $3,600,
      convertible at $0.25 per share, with interest at 10% per annum, due in January
      2007, and in connection with this financing issued a 3 year warrant for the
      purchase of 14,000 shares at a price of $0.25. The note plus accrued interest
      was converted in May 2006.





c)
      In
      February 2006, a convertible note financing arrangement in the amount of $1,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in August
      2006, and in connection with this financing issued a 3 year warrant for the
      purchase of 4,000 shares at a price of $0.25.





d)
      In
      February 2006, a convertible note financing arrangement in the amount of
      $500,000, convertible at $0.25 per share, with interest at 10% per annum due
      in
      August 2006, and in connection with this financing, issued a i) 2 year warrant
      for the purchase of 2,000,000 shares at a price of $0.25, ii) in April 2006
      a 2
      year warrant for the purchase of 2,000,000 shares at a price of $0.25, iii)
      in
      connection with this financing, as compensation for a third party’s guarantee,
      issued 1,000,000 shares of common stock, and a 2 year warrant for the purchase
      of 1,000,000 shares of common stock at an exercise price of $0.25 per share.





e)
      In
      April 2006, a secured convertible note financing arrangement in the amount
      of
      $750,000, convertible at $0.25 per share, with interest at 10% per annum, due
      in
      April 2007, and in connection with this financing issued i) a 3 year warrant
      for
      the purchase of 3,000,000 shares at a price of $0.25 ii) a 9 month unit purchase
      warrant consisting of a right to purchase 3,000,000 shares of Sub-Urban common
      stock at a price of $0.25 per share by January 18, 2007, plus a 3 year warrant
      for the purchase of 1,500,000 shares of common stock at an exercise price of
      $0.50 per share.





f)
      In May
      2006, a convertible note financing arrangement in the amount of $295,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in May
      2007,
      and in connection with this financing issued i) a 3 year warrant for the
      purchase of 1,180,000 shares at a price of $0.25 ii) a 9 month unit purchase
      warrant consisting of a right to purchase 1,180,000 shares of Sub-Urban common
      stock at a price of $0.25 per share by February, 2007, plus a 3 year warrant
      for
      the purchase of 590,000 shares of common stock at an exercise price of $0.50
      per
      share.





The
      Company also issued the following promissory notes to in private placements
      to
      qualified buyers and accredited investors.





a)
      In
      January 2006, a convertible note financing arrangement in the amount of $50,000,
      convertible at $0.25 per share, with interest at 10% per annum, due in January
      2007. The note plus accrued interest was repaid in April 2006.





b)
      In
      February 2006, a convertible note financing arrangement in the amount of
      $100,000, convertible at $0.25 per share, with interest at 10% per annum, due
      in
      February 2007. The note plus accrued interest was repaid in April 2006.





Note
      Conversions to Common Stock: In
      May
      and June 2006, convertible note holders converted $910,931, consisting of
      $796,100 of principal, and $114,831 of accrued interest into 3,012,325 shares
      of
      common stock. $764,685 of principal and accrued interest conversion adjusted
      price of approximately $0.31503, and $146,246 of principal and accrued interest
      converted at $0.25. In the 3 month period ending September 30, 2006, convertible
      note holders converted $54,935, consisting of $48,000 of principal, and $6,935
      of accrued interest into 219,740 shares of common stock converted at $0.25.




24




In
      2004,
      the Company issued a series of convertible promissory notes payable with varying
      interest stated rates from 0% to 18% per annum. An 8% per annum interest rate
      was imputed for any notes having a stated interest rate below market interest
      rates. As of September 30, 2006 the holders of $250,000, of the notes had the
      right to convert, at the option of the holder and on or prior to the fifth
      day
      prior to the Mandatory Redemption Date (July 1, 2007), into such number of
      fully
      paid non-assessable shares by dividing the now split-adjusted Original Series
      A
      Issue Price ($0.3745) by the Conversion Price. The Conversion Price shall be
      the
      split-adjusted Original Series A Issue Price of $0.3745. However, if the Company
      issues additional stock (“Additional Stock”), after the date upon which any
      these notes were first issued, for a price less than the Conversion Price,
      the
      Conversion Price shall be as adjusted prior to each such issuance. This
      adjustment shall be the Conversion Price multiplied by a fraction where the:





·
            Numerator
                shall be the number of shares of Common Stock outstanding immediately
                prior to such issuance (subject to certain adjustments for warrants,
                options and convertible securities), plus the number of shares of
                Common
                Stock that the aggregate consideration received by the Company for
                the
                Additional Stock would purchase at the Conversion Price, and;





·
            Denominator
                shall be the number of shares of Common Stock outstanding immediately
                prior to such issuance (subject to certain adjustments for warrants,
                options and convertible securities), plus the number of shares of
                such
                Additional Stock.





For
      the
      nine months ended September 30, 2006,the company recorded a charge of $107,732,
      of which $76,366 was related to the shares converted in the nine month period
      ending September 30, 2006. Accrued interest on these notes at September 30,
      2006
      was $44,767.





As
      of
      September 30, 2006, $2,780,500 of the convertible notes have rights where the
      holder of such notes may convert all or a portion of the unpaid principal plus
      unpaid accrued interest into shares of the Company’s common stock at $0.250 per
      share. The maturity dates of these notes were all due within 12 months of the
      note date. Accrued interest on these notes at September 30, 2006 is $136,316.





As
      of
      September 30, 2006, $5,300 of the convertible notes have rights where the holder
      of such notes may convert all or a portion of the unpaid principal plus unpaid
      accrued interest into shares of the Company’s common stock at $0.3750 per share.
      The maturity dates of these notes were all due within 12 months of the note
      date. Accrued interest on these notes at September 30, 2006 is $677.





Non-Convertible
      Notes Payable





At
      September 30, 2006 the Company had notes payable to a commercial finance company
      from 2004, in the amount of amount of $46,394, plus accrued interest of $6,917
      plus three notes payable from investors in 2004 and 2005 that were not
      convertible notes with a principal balance of $105,000. The total accrued
      interest on these notes at September 30, 2006 was $36,151. These notes are
      current liabilities.





In
      the 3
      month period ending September 30, 2006, the Company issued unsecured promissory
      notes in the aggregate principal amount of $300,000 (the Notes) and warrants
      to
      purchase the Company's common stock (the Warrants) to qualified buyers and
      accredited investors. The Notes bear interest at a rate of 10%, plus a 15%
      bridge fee, and due on January 2, 2007. The associated Warrants are exercisable
      for 375,000 shares of common stock at an exercise price of $0.40 per share.
      The
      Warrants, which expire three years after issuance, were assigned a value of
      $43,787, estimated using the Black-Scholes valuation model. The following
      assumptions were used to determine the fair value of the Warrants using the
      Black-Scholes valuation model: a term of three years, risk-free rate of 4.73%
      to
      4.82%, volatility of 45.46%, and dividend yield of zero. Fees for this financing
      included a cash fee of $12,500 and the issuance of 3 year warrants to purchase
      15,625 shares of the Company’s common stock at an exercise price of $0.40 per
      share, plus legal and administrative fees related to this financing of
      approximately $5,000. The Company used the cash proceeds for working capital
      needs.





25





Loan
      Guarantee





In
      February 2006, the Company reached an agreement whereby two third-parties
      personally guaranteed a convertible note payable to an investor amounting to
      approximately $500,000 and bearing interest at 10% per annum. In exchange for
      the guaranty, the Company issued 1,000,000 shares of common stock and warrants
      to purchase 2 million shares of common stock at an exercise price of $0.25
      to
      these two parties. The fair value of the Company’s stock on February 22, 2006,
      the date the stock was issued, was $0.25 per share and the estimated fair value
      of the warrants was $77,766, calculated using the Black-Scholes model. The
      aggregate fair value of the stock and warrants issued for this guarantee
      amounted to $327,767 and has been capitalized as a loan guarantee. The fee
      is
      being amortized to interest expense as the related note payable is paid down.
      As
      of September 30, 2006, the loan guarantee amount was completely amortized and
      the Company recognized interest expense of $54,628 and $327,767 for the three
      and nine months ending September 30, 2006 related to the amortization of the
      guarantee fee.





Deferred
      Financing Fees





In
      August
      2006, the Company reached an agreement whereby the Company and the holder of
      a
      $500,000 convertible note payable extended the maturity date of the note
      payable. In exchange for the deferred financing arrangement, the Company issued
      warrants to purchase 1,850,000 shares of common stock at an exercise price
      of
      $0.50. The estimated fair value of the warrants was $290,194, calculated using
      the Black-Scholes model and has been capitalized as a deferred financing
      arrangement. The fee is being amortized to interest expense as the related
      note
      payable is paid down. As of September 30, 2006, the Company recognized deferred
      financing expense of $113,176 for the three months ending September 30, 2006,
      related to the amortization of the deferred financing.





**6.**  **Shareholders’
      Deficit**





The
      Company’s authorized capital stock consists of 200,000,000 shares of $0.001 par
      value stock, with 190,000,000 shares designated as common and 10,000,000 shares
      designated as preferred. On April 25, 2006, the board of directors of the legal
      acquirer (Sub-Urban Brands) approved a forward stock split on a 29-for-1 basis.
      Accordingly, all references to number of shares, except for shares authorized,
      and to per share information in the financial statements have been adjusted
      to
      reflect these stock splits on a retroactive basis.





**7.**  **Mandatorily
      Redeemable Convertible Preferred Stock, Series A of SUI** **





SUI
      had
      issued 2,167,910 shares of mandatorily redeemable Series A Convertible Preferred
      Stock in 2004, and it had an aggregate liquidation value of $812,552 plus a
      redemption premium of $812,552 due on July 1, 2007. The liquidation value,
      plus
      the redemption premium and accrued but unpaid dividends, was payable on July
      1,
      2007, the mandatory redemption date. In addition, each share of preferred stock
      is convertible, at any time, at the option of the holder into the right to
      receive shares of the Company’s common stock. Initially, each share was
      convertible at a conversion price of $0.375 per share of common stock, subject
      to adjustment in the event of certain dividends and distributions; a merger,
      consolidation, or sale of substantially all of the Company’s assets; liquidation
      or distribution; and certain other events. Pursuant to SFAS Statement No. 150, *Accounting
      for Certain Financial Instruments with Characteristics of Both Liabilities
      and
      Equity,* mandatorily redeemable preferred stock is reported as a long-term liability
      prior to it being converted. On May 10, 2006, the holders of the preferred
      stock
      agreed to convert the preferred stock of $812,552, plus accrued dividends of
      $90,894, into 2,859,863 shares of common stock at a conversion adjusted price
      of
      approximately $0.3159 per share. The conversion of the preferred stock Series
      A
      prior to the mandatory redemption date resulted in a gain of $406.275 due the
      waiver of the redemption premium.





26




**8.**  **Common
      Stock**





Transactions
      for the nine months ended September 30, 2006





In
      February 2006, the company issued 1,000,000 shares of its restricted common
      stock having a market value of $250,000 to two individuals as compensation
      for a
      third party’s guarantee of one of the Company’s financing arrangements.





On
      May
      10, 2006, the holders of the mandatorily redeemable preferred stock agreed
      to
      convert the preferred stock of $812,552, plus accrued interest of 90,894, into
      2,859,863 shares of common stock at a conversion adjusted price of approximately
      $0.3159 per share.





On
      May
      11, 2006, in connection with the merger of Sub-Urban Brands, Inc (legal
      acquirer) and Sub-Urban Industries, Inc. (accounting acquirer), the legal
      acquirer had 14,500,000 shares issued and outstanding, and issued exchanged
      31,673,363 of its common stock for the common stock of the accounting acquirer.





Note
      Conversions: In May and June 2006, convertible note holders converted $910,931,
      consisting of $796,100 of principal, and $114,831 of accrued interest into
      3,012,325 shares of common stock. $764,685 of principal and accrued interest
      conversion adjusted price of approximately $0.31503, and $146,246 of principal
      and accrued interest converted at $0.25. In the 3-month period ending September
      30, 2006, convertible note holders converted $54,935, consisting of $48,000
      of
      principal, and $6,935 of accrued interest into 219,740 shares of common stock
      converted at $0.25.




**9.**  **Warrants**





As
      of
      September 30, 2006 and December 31, 2005, the Company has 28,349,227 and
      2,660,203, warrants to purchase shares of common stock respectively outstanding.
      Such issuances were accounted for under Financial Accounting Standards Board
      Statement No. 123 using the Black-Scholes option-pricing model (with the same
      assumptions as those used for the options, see Note 10). On a beneficial
      conversion adjusted basis, as of September 30, 2006 and December 31, 2005,
      the
      Company has 29,272,870 and 3,603,845, warrants to purchase shares of common
      stock respectively outstanding.





There
      were no warrants exercised during the period ending September 30, 2006 and
      the
      year ended December 31, 2005.




27




Changes
      in the status of warrants, prior to any conversion price adjustments or warrant
      quantity adjustments are summarized below for the 6 month period ending
      September 30, 2006 and the year ended December 31, 2005:




**Nine
                  Months ended September 30, 2006**
              
              **Year
                  ended December 31, 2005****Warrants**
              
              **Weighted**
                **Average**
                **Price**
              
              **Warrants**
              
              **Weighted**
                **Average**
                **Price**Outstanding
                  at beginning of period
              
              
              2,660,203
              
              $
              0.320
              
              
              943,643
              
              $
              0.355Granted
              
              
              25,689,024
              
              
              0.287
              
              
              1,716,560
              
              
              0.300Cancelled
                  or expired
              
              
              —
              
              
              —
              
              
              —
              
              
              —Exercised
              
              
              —
              
              
              —
              
              
              —
              
              
              —Outstanding
                  at end of period
              
              
              28,349,227
              
              $
              0.290
              
              
              2,660,203
              
              $
              0.320Exercisable
                  at the end of the period
              
              
              28,349,227
              
              $
              0.290
              
              
              2,660,203
              
              $
              0.320Price
                  range of warrants
              
              $
              0.10
                  - 0.500
              
              $
              0.290
              
              $
              0.250
                  - 0.375
              
              $
              0.320




Transactions
      for the 9 months ended September 30, 2006





In
      the 9-
      month period ending September 30, 2006, the Company issued warrants convertible
      into 4,495,625 shares of its common stock to various consultants. The
      exercise price of the warrants ranged from $0.10 to $0.25 per share. The Company
      recognized non-cash expense of $495,114 related to these grants. The
      expense was determined based on the Black-Scholes option value method. The
      warrants were granted in lieu of cash compensation for services rendered. In
      May
      2006, the Company issued 3,600,000 for the purchase of the Company’s common
      stock, which require the Company to file a registration statement with the
      Securities and Exchange Commission to register the resale of the common stock
      issuable upon the exercise of the warrants no later than November 16, 2006
      (see
      Subsequent Events). Under EITF No. 00-19, Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company's own stock,
      the
      ability to register stock is deemed to be outside of the Company's control.
      Accordingly, the initial fair value of the Warrants of $315,827 was recorded
      as
      an accrued warrant liability in the consolidated balance sheet, and is marked
      to
      market at the end of each reporting period. In the 3-month period ending
      September 30, 2006, the above issuances of were marked to market with an
      increase the warrant liability and a non-cash loss of $202,730.





In
      the
      9-month period ending September 30, 2006, the Company issued warrants
      convertible into 18,343,400 shares of its common stock in connection with
      the acquisition of debt. The exercise price of these warrants ranged from $0.25
      to $0.50 per share. The value of these warrants was $2,327,176, and the Company
      recognized interest expense of $565,568 for the amortized portion of these
      warrants. The value and expense was determined based on the Black-Scholes option
      value method.




28




In
      the
      9-month period ending September 30, 2006, the Company issued warrants
      convertible into 1,000,000 shares of its common stock in connection
      with a loan guarantee. The exercise price of these
      warrants was $0.25   per share. The value of these warrants was
      $77,767, and the Company recognized loan guarantee expense of $77,767 for the
      amortized portion of these warrants. The value and expense was determined based
      on the Black-Scholes option value method.





In
      the
      9-month period ending September 30, 2006, the Company issued warrants
      convertible into 1,850,000 shares of its common stock in connection
      with a deferred financing arrangement. The exercise price of these
      warrants was $0.50   per share. The value of these warrants was
      $290,194, and the Company recognized deferred financing expense of $113,176
      for
      the amortized portion of these warrants. The value and expense was determined
      based on the Black-Scholes option value method.





**10.****Stock-Based
      Compensation**





On
      June
      25, 2003 the Board of Directors of the Company adopted an equity incentive
      plan.
      At September 30, 2006, the plan has authorized a share pool 18,702,965 shares,
      of which a total of 11,907,252, were outstanding. There were no stock options
      exercised during the nine-month period ending September 30, 2006 years and
      year
      ended December 31, 2005.





The
      Company accounts for its stock-based compensation based on SFAS No. 123,
“Accounting for Stock-Based Compensation”. Pursuant to SFAS No.123, the Company
      recognized an expense for the fair market value of the stock-based instrument
      granted to third parties and employees. SFAS No. 123, established and encouraged
      the use of the fair value based method of accounting for stock-based
      compensation arrangements under which compensation cost is determined using
      the
      fair value of stock-based compensation determined as of the date of grant and
      is
      recognized over the periods in which the related services are rendered. The
      Company uses the Black-Scholes Model to determine fair value for valuing options
      granted. The Black-Scholes method is based on the following assumptions for
      the
      nine period ending September 30, 2006: average risk free interest rate ranging
      from 4.68% to 5.24%; dividend yield of 0%; average volatility factor of the
      expected market price of the Company’s common stock of 50.28% and 43.85%; and an
      expected life of 6 years for the options.





For
      the
      period ending September 30, 2006, the company granted issued options convertible
      into 1,531,165 shares of its common stock to officers and employees of the
      Company. The exercise price of the options was from $0.33 per share to $0.42.
      The value of these grants was $299,930, and the Company recognized compensation
      expense of $47,189 for the vested portion of these grants.





For
      the
      period ending September 30, 2006, the company canceled options convertible
      into
      262,500 shares of its common stock from a forfeiture as a result of a directors
      resignation. The exercise price of the options was $0.25 per share. The Company
      recorded a credit of $10,432 to non-cash compensation expense for the excess
      value over straight-line vesting for the forfeiture.




29





The
      fair
      value of options granted under the plan were estimated at the date of grant
      using the Black-Scholes model with the following weighted average assumptions:




**Three
                months ended**
            
            **Nine
                months ended****September
                30,**
            
            **September
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Expected
                term (in years)
            
            
            6.0
            
            
            —
            
            
            6.0
            
            
            6.0Risk-free
                interest rate
            
            
            4.62
                - 4.81
            %
            
            —
            %
            
            4.62-
                5.24
            %
            
            3.91
            %Expected
                volatility
            
            
            43.85
            %
            
            —
            %
            
            43.85
                - 50.28
            %
            
            52.6
            %Expected
                dividend yield
            
            
            0
            %
            
            —
            %
            
            0
            %
            
            0
            %Weighted
                average fair value at grant date
            
            $
            0.20
            
            $
            —
            
            $
            0.18
            
            $
            0.14


30




The
        effect of recording share-based compensation expense for the three months
        and
        nine months ended September 30, 2006 is as follows:




**Three
                  Months Ended September 30,******
                **2006**
              
              **Nine
                  Months Ended**
                **September
                  30,**
                **2006**Stock-based
                  compensation expense related to employee stock options
              
              $
              184,390
              
              $
              525,879Tax
                  benefit
              
              
              0
              
              
              0Net
                  decrease in net earnings
              
              $
              184,390
              
              $
              525,879Effect
                  on:Cash
                  flows from operating activities
              
              
              —
              
              
              —Cash
                  flows from financing activities
              
              
              —
              
              
              —Effect
                  on:Net
                  earnings per share — Basic
              
              $
              0.00
              
              $
              0.01Net
                  earnings per share — Diluted
              
              $
              0.00
              
              $
              0.01





For
      the
      three and nine months ended September 30, 2006, total share-based compensation
      expense recognized in earnings before taxes was $184,390 and $525,879,
      respectively and the total related recognized tax benefit was zero in both
      periods.


31




Changes
      in the status of options are summarized below for
      the nine-month period ending September 30, 2006:


**Shares
                  Available**
                **for
                  Grant**
              
              **Number
                  of**
                **Shares**
              
              **Weighted**
                **Average
                  Exercise**
                **Price**
              
              **Weighted**
                **Average**
                **Remaining**
                **Contractual**
                **Term**
                **(in
                  years)**
              
              **Aggregate**
                **Intrinsic
                  Value**
                **(1)**Balance
                  at December 31, 2005
              
              
              367,302
              
              
              7,632,698
              
              $
              0.259Granted
              
              
              (4,537,054
              )
              
              4,537,054
              
              
              0.353Authorized
              
              
              10,702,965
              
              
              —
              
              
              —Cancelled
                  or expired
              
              
              262,500
              
              
              (262,500
              )
              
              0.250Exercised
              
              
              —
              
              
              —
              
              
              —Balance
                  at September 30, 2006
              
              
              6,795,713
              
              
              11,907,252
              
              
              0.279
              
              
              9.1
              
              $
              746,957Exercisable at
                  September 30, 2006
              
              
              
              
              
              5,649,814
              
              
              
              
              
              
              
              $
              392,472





(1)
      The
      aggregate intrinsic value represents the total pre-tax intrinsic value, based
      on
      the Company’s closing stock price of $0.33 as of September 30, 2006, which would
      have been received by the option holders had all option holders exercised their
      options as of that date.




The
      total
      pre-tax intrinsic value of options exercised was zero during the three and
      nine
      months ended September 30, 2006, respectively.


32





Total
      options under the Plan at September 30, 2006, comprised the following:


**Option****Exercise**
                **Price**
              
              **Number
                  Outstanding**
                **as
                  of**
                **September
                  30, 2006**
              
              **Weighted
                  Average**
                **Remaining**
                **Contractual
                  Life (Years)**
              
              **Number**
                **Exercisable**
                **as
                  of**
                **September
                  30, 2006**$
              0.64
              
              
              656,950
              
              
              9.7
              
              
              82,7940.42
              
              
              1,000,000
              
              
              10.0
              
              
              16,4380.38
              
              
              400,500
              
              
              7.9
              
              
              400,5000.33
              
              
              531,165
              
              
              10.0
              
              
              00.28
              
              
              632,198
              
              
              7.0
              
              
              632,1980.25
              
              
              8,686,439
              
              
              9.1
              
              
              4,517,884Total
              
              
              11,907,252
              
              
              
              
              
              5,649,814





As
      of
      September 30, 2006, there was $628,921 of total unrecognized compensation cost
      related to non-vested share-based compensation arrangements granted. This
      unrecognized compensation expense is expected to be recognized over a
      weighted-average period of 1.4 years.





At
      September 30, 2006 the Company has 6,257,438 options which are not vested,
      with total outstanding options at September 30, 2006 of 11,907,252.




**11.**  **Commitments**




In
      July
      of 2004, the Company entered into a lease for approximately 4,000 square feet
      of
      combined office and warehouse space located at 2222 E. Washington, Los Angeles,
      California, at a monthly rental rate of $2,500. The lease commenced July 15,
      2004 and expired July 15, 2006. In August 2006, the Company moved its operations
      and entered into a lease for approximately 10,600 square feet of combined office
      and warehouse space in leased premises located at 8723 Bellanca Avenue, Los
      Angeles, California, at a monthly base rental rate of $8,931 to $9,569 over
      the
      term of the lease. The lease commences August 21, 2006 and expires October
      31,
      2009. The Company conducts all of its executive, administrative, distribution
      and operational functions in this facility.


33




Future
      minimum lease payments under this operating lease are as follows:




2006
              
              $
              21,0312007
              
              
              108,7652008
              
              
              112,5932009
              
              
              95,688Total
              
              $
              338,077





Rent
      expense under operating leases for the nine-month period ended September 30,
      2006 is $36,217.





**12.**  **Concentrations
      of Certain Risks**





Concentration
      of Credit Risk





The
      Company’s financial instruments that are exposed to concentrations of credit
      risk consist primarily of cash and accounts receivable. The Company maintains
      its cash in bank deposit accounts, that at times may exceed federally insured
      limits. The Company has not experienced any losses in such accounts.





The
      Company extends credit to customers located throughout North America whose
      sales
      invoices are not subject to the secured line of credit accounts receivable
      program based upon an evaluation of the customer’s financial condition and
      credit history. The Company’s customers located outside of North America pay on
      a cash-in-advance basis.





The
      Company performs ongoing credit evaluations of its customer’s financial
      condition, and limits the amount of credit extended when deemed necessary,
      but
      generally does not require collateral. At September 30, 2006 ten of the
      Company’s customers accounted for 88% of the Company’s accounts receivable, each
      with 2% to 34% of the Company’s accounts receivable. One other customer
      accounted for 20% of the Company’s net sales for the nine-month period ended
      September 30, 2006. As of September 30, 2005 three of the Company’s customers
      accounted for 100%, each accounting for 14% to 70% of the Company’s accounts
      receivable.




**13.**  **Subsequent
      Events**





Issuance
      of Promissory Note and Warrants





In
      November 2006, the Company issued a subordinated promissory note with an
      accredited investor in the amount of $500,000, with interest payable at 8%,
      with
      a maturity date of August 6, 2007. In connection with this transaction, the
      Company also issued 3 year warrants to purchase 2,500,000 shares of the
      Company’s common stock at an exercise price of $0.40 per share. The
      securities were offered and sold to the investors in a private placement
      transaction made in reliance upon exemptions from registration pursuant to
      Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated
      thereunder.   The investors are accredited investors as defined in
      Rule 501 of Regulation D promulgated under the Securities Act of
      1933.





34




Change
      in Demand Registration Rights





In
      November 2006, in connection with a certain warrant dated May 16, 2006 for
      services, the warrant holder agreed to change the date of its demand
      registration rights as set forth in such warrant from “No later than November
      16, 2006” to “Within the same time period as any investor in a proposed
      financing of the Company,”.





Note
      Conversions to Common Stock:





In
      October 2006, convertible note holders converted $178,638, consisting of
      $151,000 of principal, and $27,638 of accrued interest into 567,931 shares
      of
      common stock. $177,573 of principal and accrued interest was converted at a
      conversion adjusted price of approximately $0.31503, and $1,065 of principal
      and
      accrued interest converted at $0.25.


35


**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
      OPERATION.**





Safe
      Harbor Statement





We
      desire
      to take advantage of the "safe harbor" provisions of the Private Securities
      Litigation Reform Act of 1995. This Report on Form 10-QSB contains a number
      of
      forward-looking statements that reflect management's current views and
      expectations with respect to our business, strategies, products, future results
      and events and financial performance. All statements made in this Report other
      than statements of historical fact, including statements that address operating
      performance, events or developments that management expects or anticipates
      will
      or may occur in the future, including statements related to distributor
      channels, volume growth, revenues, profitability, new products, adequacy of
      funds from operations, statements expressing general optimism about future
      operating results and non-historical information, are forward-looking
      statements. In particular, the words "believe," "expect," "intend," "
      anticipate," "estimate," "may," "will," variations of such words, and similar
      expressions, identify forward-looking statements, but are not the exclusive
      means of identifying such statements, and their absence does not mean that
      the
      statement is not forward-looking. These forward-looking statements are subject
      to certain risks and uncertainties, including those discussed below. Our actual
      results, performance or achievements could differ materially from historical
      results as well as those expressed in, anticipated or implied by these
      forward-looking statements. We do not undertake any obligation to revise these
      forward-looking statements to reflect any future events or circumstances.





Readers
      should not place undue reliance on these forward-looking statements, which
      are
      based on management's current expectations and projections about future events,
      are not guarantees of future performance, are subject to risks, uncertainties
      and assumptions (including those described below) and apply only as of the
      date
      of this Report. Our actual results, performance or achievements could differ
      materially from the results expressed in, or implied by, these forward-looking
      statements. We undertake no obligation to publicly update or revise any
      forward-looking statements, whether as a result of new information, future
      events or otherwise.





The
      following discussion should be read in conjunction with our consolidated
      financial statements and the related notes that appear elsewhere in this report.
      Our actual results could differ materially from those discussed in these forward
      looking statements. Factors that could cause or contribute to such differences
      include, but are not limited to, those discussed below and elsewhere in this
      report, particularly in the section entitled “Risk Factors” of this report.





As
      used
      in this report, the terms “we”, “us”, “our”, and “Sub-Urban Brands” mean
      Sub-Urban Brands, Inc. and our subsidiary Sub-Urban Industries, Inc.





THE
      FOLLOWING DISCUSSION AND ANALYSIS PROVIDES INFORMATION THAT OUR MANAGEMENT
      BELIEVES IS RELEVANT TO AN ASSESSMENT AND UNDERSTANDING OF OUR RESULTS OF
      OPERATIONS AND FINANCIAL CONDITION. THIS DISCUSSION SHOULD BE READ TOGETHER
      WITH
      OUR FINANCIAL STATEMENTS AND THE NOTES TO FINANCIAL STATEMENTS WHICH ARE
      INCLUDED IN THIS REPORT, AND WITH OUR COMPANY’S CURRENT REPORT ON FORM 8-K FILED
      ON MAY 15, 2006 AND ALL SUBSEQUENT FILINGS.




36




**Overview**





On
      May
      11, 2006, pursuant to an Agreement Concerning the Exchange of Securities by
      and
      between Sub-Urban Brands, Inc., (formerly known as DP&D, Inc.), a Nevada
      corporation (“the Company”), Sub-Urban Industries, Inc., a California
      corporation (“Sub-Urban”), and the security holders of Sub-Urban (the “Sub-Urban
      Security Holders”), the Company acquired all of the outstanding securities of
      Sub-Urban from the Sub-Urban Security Holders in exchange for newly issued
      unregistered securities of the Company. As a result of the share exchange
      (“Merger”), the Company, which previously had no material operations, acquired
      the business of Sub-Urban. The acquisition has been accounted for as a reverse
      merger (recapitalization) with SUI deemed to be the accounting acquirer.





Pursuant
      to the Agreement, (i) 31,673,363 shares of the Company’s Common Stock were
      issued in exchange for all 31,673,363 shares of Sub-Urban’s Common Stock, (ii)
      $2,734,900 face amount of the Company’s convertible promissory notes convertible
      into the Common Stock of the Company at a range of prices from $0.250 per share
      to $0.375 per share, and subject to respective conversion price adjustments,
      were exchanged for a like face amount of promissory notes held by the Sub-Urban
      Security Holders (iii) 16,822,245 Common Stock purchase warrants of the Company
      convertible at prices ranging from $0.140 to $0.375 per share, were exchanged on
      a one-for-one basis and are exercisable at the same price and terms per share
      as
      the warrants of Sub-Urban, and (iv) 7,732,698 stock options of the Company
      exercisable at prices ranging from $0.250 to $0.375 per share were exchanged
      on
      a one-for-one basis and are exercisable at the same price and terms per share
      as
      the stock options of Sub-Urban.





The
      Merger resulted in a change of control of the Company, with the former
      stockholders of the Company owning approximately 31.4% of the Company’s
      outstanding Common Stock, or approximately 17.8% assuming the conversion of
      all
      of the company’s outstanding convertible notes, options and warrants.
      Shareholders of Sub-Urban now own 68.6% of the Company’s outstanding common
      stock. The
      Agreement was determined through negotiations between the Company and Sub-Urban.
      Prior to the Merger, two entities affiliated with a principal shareholder of
      the
      Company made short term loans totaling $150,000 plus interest at 10% to
      Sub-Urban which were repaid by Sub-Urban in April 2006. Other than these two
      short term loans, there were no material relationships between the Company
      and
      Sub-Urban, any of their respective affiliates, directors or officers or any
      associates of such directors or officers.





On
      August
      21, 2006, we moved our corporate offices and entered into a 38 month lease
      for
      10,632 square feet located at 8723 Bellanca Ave, Bldg. A., Los Angeles, CA
      90045.





**Critical
      Accounting Policies and Estimates**





Our
      discussion and analysis of financial condition and results of operations is
      based upon our financial statements, which have been prepared in accordance
      with
      accounting principles generally accepted in the United States of America. The
      preparation of these financial statements requires us to make estimates and
      judgments that affect the reported amounts of assets, liabilities, revenue
      and
      expenses, and related disclosure of contingent assets and liabilities. On an
      ongoing basis, we evaluate our estimates. We base our estimates on historical
      experience and on various other assumptions that we believe to be reasonable
      under the circumstances. These estimates and assumptions provide a basis for
      making judgments about the carrying values of assets and liabilities that are
      not readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions, and these differences
      may
      be material.





We
      believe the following critical accounting policies affect its more significant
      judgments and estimates used in the preparation of its consolidated financial
      statements.




37




**Convertible
      Debt Financing and Derivative Liabilities**





In
      accordance with Statement of Financial Accounting Standards No. 133, "Accounting
      for Derivative Instruments and Hedging Activities," as amended ("SFAS 133"),
      EITF 00-19, 00-27, 05-02, 05-04 and 05-08. The company has reviewed the terms
      of
      its convertible debt financing and the holders’ conversion rights provisions
      (collectively, the features) contained in the terms governing the Debentures
      which are not clearly and closely related to the characteristics of the
      Debentures. Accordingly, the features qualified as embedded derivative
      instruments at issuance and the warrants were free-standing derivative
      instruments These derivative features do not qualify for any scope exception
      within SFAS 133, they were required by SFAS 133 to be accounted for separately
      from the debt instrument and recorded as derivative financial instruments.
      (See
      Convertible Debt Notes to Financial Statements for more information). For the
      nine months ended September 30, 2006, we recorded an aggregate non-cash interest
      expense items of $2,447,776 including $1,612,224 related to the
      conversion features on $3,035,800 of our convertible notes;
      $814,410 related to warrants; and $21,144 related to the value of warrants
      on $496,394 of the non-convertible notes.  During the nine month period
      ended September 30, 2006, the Company recorded $1,345,000 in warrant liabilities
      for warrants with mandatory registration rights. These amounts were
      revalued to market at September 30, 2006 to $1,041,566. During the nine month
      period ended September 30, 2006, the Company recorded $1,228,689 in conversion
      feature liabilities. These amounts were revalued to market at September 30,
      2006
      to $714,348.





**Cash
      Requirements and Additional Funding.** We
      will
      require additional financing, either from loans, or the issuance of debt and
      equity securities. We are unlikely to obtain material commercial bank financing.
      If we cannot obtain sufficient additional financing, we may be forced to slow
      down or suspend our operations. The success of our business will be dependent
      on
      a number of factors, many of which are beyond our control (see "Risk Factors,"
      below). Accordingly, we can give no assurance that the Company will become
      profitable. Further, we can give no assurance that we will be able to obtain
      sufficient financing to implement our business plan or that, if financing is
      obtained, such financing will not materially dilute our existing shareholders.
      Our ability to obtain additional financing in the coming months will depend
      upon
      a number of factors, including market conditions, our results of operations,
      our
      success in implementing our business plan for brand launches, our acquisition
      strategy and investors' perception of our business and prospects.





**Assets.** Our
      current assets total $518,843, consisting primarily of inventory net or reserves
      of $224,942, accounts receivable of $51,647, prepaids and advances of $58,013,
      and $177,018 representing the unamortized deferred financing costs.





**Liabilities
      and Working Capital.** Our
      liabilities of $5,039,746 are all current and consist primarily of accounts
      payable of $463,586, accrued salary and benefits of $214,074, secured
      convertible notes payable in the principal amount of $750,000, convertible
      notes
      payable in the principal amount of $2,285,800, and non-convertible notes payable
      in the principal amount of $496,394. The convertible notes have a conversion
      price adjustment liability of $49,380, and a conversion feature liability of
      $714,348. The Company also has warrant liabilities of $1,041,566.





**Results
      of Operations**





Nine
      Months Ended September 30, 2006 Compared to September 30, 2005





In
      the
      third fiscal quarter of 2005, we pulled our then current WHITEBOY® products from
      our distribution channels. As a result of the efforts, in 2006, the Company
      focused on rebuilding the infrastructure of the Company and redesigning current
      brands and developing our new brand Mash Culture LabTM for launch in the third
      fiscal quarter of 2006. On May 11, 2006 Sub-Urban Industries, Inc., a California
      corporation, effected a reverse merger with Sub-Urban Brands, Inc., a Nevada
      corporation. The Company launched its Mash Culture LabTM apparel brand in August
      2006.




38




We
      recorded sales of $79,259, for the nine month period ending September 30, 2006,
      compared to $126,300 for the nine month period ending September 30, 2005, a
      decrease of 37%, reflecting the Company’s investment and focus in development of
      future products and brand name recognition. Our gross margin was 23% for the
      current and prior nine-month period. Our operating expenses for the nine-month
      period ending September 30, 2006 were $3,266,212, compared to $1,306,114 for
      the
      nine-month period ending September 30, 2005, an increase of 150%. This change
      was due primarily to the 148% increase of $1,448,255 in general and
      administrative expenses; a 178% increase in sales and marketing expenditures
      of
      $391,401; and a 112% increase in product development expenses of $120,472.





The
      increase in general and administrative expenses is due primarily to i) increases
      in investor relations expense of $503,431, which includes $315,827 in non-cash
      compensation for a warrant issuance; ii) increases in payroll expenses of
      $238,310 due to increased headcount; iii) increases of $306,645 in non-cash
      compensation related to vesting stock options accounting under SFAS123R;
      iv) increases of $161,715 in investment banking fees related to financings;
      and
      v) increases of $118,976 in professional fees primarily related to the merger
      of
      May 11, 2006, on-going financings, and compliance requirements as a public
      company.





The
      net
      of other expenses for the nine-month period ending September 30, 2006 were
      $2,159,804, compared to $397,510, an increase of 443% from the nine-month period
      ending September 30, 2005. This change is primarily due to an increase of
      $2,430,906, in non-cash interest expense from equity instruments issued in
      connection with convertible notes, a non-cash loan guarantee expense of
      $327,768, an increase of $213,841 for the conversion features of equity
      instruments, and a non-cash deferred financing cost of $113,176. These increases
      were offset by a i) non-cash change of $609,413 in preferred stock redemption
      accretion due to the conversion of preferred stock to common stock prior to
      the
      Merger of May 11, 2006; ii) a non-cash gain on the revaluation of warrant
      liabilities of 303,434; and iii) a non-cash gain on the revaluation of
      conversion feature liabilities of 514,341.





The
      Company’s net loss was $5,407,699 compared to $1,674,118 for the nine-month
      period ending September 30, 2006 and 2005, respectively. Cash used for the
      Company’s operating activities was $2,426,149, and $684,830 for the nine-month
      periods ending September 30, 2006 and 2005,respectively.





Three
      Months Ended September 30, 2006 Compared to September 30, 2005





The
      Company launched its Mash Culture LabTM apparel brand in August 2006.





We
      recorded sales of $54,222, for the three month period ending September 30,
      2006,
      compared to $22,333 for the three month period ending September 30, 2005, an
      increase of 142%, due to initial sales of newly launched product and from the
      liquidation of discontinued product. Our gross margin was 11% for the current
      period compared to 28% in the three-month period ending September 30, 2005,
      reflecting the lower margins on the sale of discontinued product. Our operating
      expenses for the three-month period ending September 30, 2006 were $1,211,563,
      compared to $516,962 for the three-month period ending September 30, 2005,
      an
      increase of 134%. This change was due primarily to the 116% increase of $470,686
      in general and administrative expenses; a 216% increase in sales and marketing
      expenditures of $151,907; and a 177% increase in product development expenses
      of
      $72,008.





The
      increase in general and administrative expenses is due primarily to i) increases
      in investor relations expense of $98,875; ii) increases in payroll expenses
      of
      $40,946 due to increased headcount; iii) increases of $85,906 in non-cash
      compensation related to vesting stock options accounting under SFAS123R;
      and iv) increases of $113,289 in investment banking fees related to
      financing.




39




The
      net
      of other expenses for the three-month period ending September 30, 2006 were
      $970,172, compared to $134,760, an increase of 619% from the three-month period
      ending September 30, 2005. This change is primarily due to an increase of
      $1,524,020, in non-cash interest expense from equity instruments issued in
      connection with convertible notes, a non-cash loan guarantee expense of $54,628,
      an increase of $113,176 for non-cash deferred financing. These increases were
      offset by a i) a non-cash gain on the revaluation of warrant liabilities of
      303,434; and ii) a non-cash gain on the revaluation of conversion feature
      liabilities of 514,341.





The
      Company’s net loss was $2,175,852 compared to $645,443 for the three-month
      period ending September 30, 2006 and 2005, respectively.





**Liquidity
      and Capital Resources**





At
      September 30, 2006 the Company had a working capital deficit of $4,520,903.
      The
      Company’s total assets at September 30, 2006 were $570,226, of which $7,223 was
      cash and $51,647 in accounts receivable. At September 30, 2006 the Company’s
      total liabilities were $5,039,746. The Company has invested in the redesign
      and
      launch of its new brands, and does not anticipate material revenues from these
      products prior to the first quarter of fiscal 2007. In November 2006, the
      Company issued a subordinated promissory note with an accredited investor in
      the
      amount of $500,000. The Company used the cash proceeds for working capital
      needs.





**Our
      Plan for Operations for in 2006**





The
      first
      nine months of 2006 consisted of the Company repositioning its initial brand
      offering WHITEBOY® for men. The Company was able to successfully release
      WHITEBOY® for men as a high-end specialty brand with distribution to image-based
      retailers. The brand was selected by the internationally recognized Fred Segal
      of Santa Monica, CA for delivery in the 3 rd quarter
      of 2006. The repositioning of the WHITEBOY® for men brand allowed the Company to
      continue developing its multi-brand revenue model. The Company spent the first
      9
      months of 2006 developing two more brands using the “Rooster” logo created by
      WHITEBOY Ò for
      men.
      The development of MASH CULTURE LAB Ô and
      WHITEBOY® for girls began in February of 2006 culminating with their wholesale
      launch at the New York Pool Trade Show in July of 2006. These two brands, unlike
      WHITEBOY Ò for
      men,
      are seeking larger distribution paths through specialty retail chains and
      department stores.





The
      Company also focused on attracting industry-leading talent to design and produce
      our core offerings. The Company hired Ashley Scranton as design director for
      WHITEBOY® for girls with her focus on developing an appealing mass distributed
      brand. The company also hired Melanie Weaver as director of production for
      all
      brands owned and distributed by Sub-Urban Brands, Inc. Ms. Weaver immediately
      moved nearly all sourcing and production overseas to decrease the Company’s
      costs of production.





In
      continuing to develop WHITEBOY Ò for
      men
      as a high-end exclusive specialty brand, the Company initiated its practice
      of
      partnering with widely known and respected artists to design its collection.
      The
      Company entered into a seasonal agreement with well-known punk rock fashion
      icon
      Heidi Minx of Franky and Minx Ò .
      Ms Minx
      developed the majority of the Fall 2006 offering of WHITEBOY Ò for
      men.





The
      Company also completed staffing its regional based sales force by adding
      representatives to the West Coast, the Southwest, the Southeast and the Midwest
      to compliment our east coast showroom. The Company negotiated commission based
      agreements, paying 10% for sales made within their respective territories for
      the distribution of our brands. These sales agreements are cancelable by the
      Company with 30 days written notice.





40




We
      also
      used the first 6 months of operation in 2006 to continue our goal of becoming
      a
      publicly Company trading in the Over-The- Counter bulletin board market. The
      Company realized this goal on May 11, 2006 when we completed a successful merger
      with DP&D, Inc, a Nevada corporation.





The
      Company will continue to sell its three brands in the wholesale environment
      as
      well as continue its retail operations online. The Company attended several
      wholesale tradeshows in the third quarter of fiscal of 2006, and revenues are
      anticipated commencing in the first quarter of 2007. These tradeshows are
      industry known and are located in New York City, Las Vegas, Los Angeles,
      Atlanta, Chicago, Miami and Dallas. In addition, the Company has instituted
      an
      internal sales campaign utilizing two sales representatives contacting over
      3,000 retail stores by phone and mail seeking orders for the Company’s brands.





The
      Company will be seeking international distributors who represent premium
      lifestyle and street brands in their respective countries. We will focus on
      agreements for distribution in Japan, Australia, Europe and Canada. The Company
      has also begun seeking high margin recurring revenues streams through licensing
      of additional branded products. The Company will actively seek distribution
      arrangements for one or all of its brands in footwear, belts, bags, headwear
      and
      other apparel and accessory related products.





The
      Company is also actively pursuing emerging and or established apparel companies
      for acquisition to complement WHITEBOY Ò for
      men,
      WHITEBOY Ò for
      girls
      and MASH CULTURE LAB Ô .
      The
      company has issued two non-binding letters of intent for two companies with
      established brands and revenues. Subject to successful financing activities,
      the
      Company intends to make one or both of these acquisitions by 12/31/2006 that
      is
      consistent with our multi brand approach to generating revenue in addition
      to
      our current offerings in apparel.





MCLTM,
      is
      marketed to individuals between the ages of 13 and 29 who enjoy the “urban” or
      the “board” (surf/skate) lifestyles, but are not hard-core in either. We believe
      that while our core customer is fond of the “urban” and “board” lifestyles,
      neither fully represents that customer’s identity. We believe that there is a
      growing marketplace where rock, rap, electronic music and sports are merging;
      this is the melting pot MASH CULTURE LABTM represents, which we term the
“Suburban” market and which is sometimes referred to as “Mash” or “Mash
      Culture”. We believe that the “Suburban/Mash” target market dwarfs both the
“urban” and “board” markets, although it is heavily influenced by both, as well
      as by many other factors. We have been a leader in identifying this “Mash
      Culture” and have incorporated it into our designs, marketing and management
      programs as well as identified it as our brand name. We believe that the racial,
      cultural and economic diversity of the large cities will greatly expand in
      the
      next few years. “Mash Culture”, which borrows the best of existing trends and
      ideas, will be the source of creative dynamism, because it addresses our target
      market’s desire to be interesting and unpredictable. Fueled by technology, it is
      already changing fashion, design and music. MASH CULTURE LABTM is targeted for
      specialty chain and department store distribution. MCLTM is to have a much larger
      distribution than WHITEBOY® for men in that the garments have been designed for
      a broad appeal. We have spent considerable time ensuring that the quality of
      the
      garment meets or exceeds that of our competition. In addition, we believe our
      graphics are a distinguishing feature for MCLTM. We use theme-based concepts and
      hand-drawn art to achieve fresh designs. We believe that our leading-edge
      graphics along with premium-quality garments will allow us to develop MCLTM into
      a widely distributed distinctive brand. We further believe that theme-based
      collections with a single point of view gives the retailer the ability to buy
      deeper into the line with the assurance of merchandising the product in stores.
      We have also developed a signature print known as the “COCK CAMO” using our
      rooster logo design. This signature print features a prancing rooster on a
      camouflage print fabric, which we believe clearly distinguishes us from our
      competitors. While not a specific garment type, the “COCK CAMO” is becoming an
      integral part of the MCLTM brand.





41




The
      Company will continue its aggressive multi media image based marketing campaign
      known as “Get Cocky” for the next 6 months. This campaign will consist
      of street marketing in 8 major metropolitan markets, advertising in trade
      and fashion magazines, product placement in fashion magazines, celebrity gifting
      and co-branded marketing initiatives with Fortune 500 media organizations.
      The
      Company will continue developing media and entertainment industry relationships
      with EMI Capital Group and Emmis Communications, Inc.





We
      will
      continue in our efforts to produce better made garments at a lower cost through
      our overseas vendors for our mass distributed brands WHITEBOY Ò for
      girls
      and MASH CULTURE LAB Ô .
      The
      Company will focus on its knit based products being produced in China and India,
      and denim and woven products will also be produced in China and India for
      WHITEBOY Ò for
      girls
      and MASH CULTURE LAB Ô .
      WHITEBOY Ò for
      men
      will primarily be manufactured in Los Angeles due to its highly customized
      offering and the need to turn new product every 6-10 weeks. Our production
      arrangements are contracted for by purchase orders at an arms-length negotiated
      price and delivery date.





In
      the
      three-month period ending September 30, 2006 we moved our operations to a larger
      facility near the Los Angeles airport, and moved our warehousing and
      distribution in-house.





In
      order
      to complete our business strategy of developing a multi brand offering, the
      Company will need to raise $8,000,000 in financing in the fourth quarter of
      2006. These proceeds will be used to continue to develop our three current
      brands, finance production, execute strategic acquisitions and for the general
      operating costs of the Company. Further, we can give no assurance that we will
      be able to obtain sufficient financing to implement our business plan or that,
      if financing is obtained, such financing will not materially dilute our existing
      shareholders. Our ability to obtain additional financing in the coming months
      will depend upon a number of factors, including market conditions, our results
      of operations, our success in implementing our business plan for brand launches,
      our acquisition strategy and investors' perception of our business and
      prospects.





**Risk
      Factors**





**RISKS
      RELATED TO OUR BUSINESS**





**The
      Company acquired SUI on May 11, 2006, which had a limited operating history,
      and, accordingly, is subject to substantial risks inherent in the commencement
      of a new business enterprise. Prior to the acquisition of SUI, the Company
      had
      no operations.**





We
      have
      incurred losses since inception, including a loss of $2,689,842 in 2005, and
      expect to incur net losses for the foreseeable future.





**Our
      business strategy is unproven, and we may not be successful in addressing early
      stage challenges, such as establishing our position in the market and developing
      our products and services. To implement our business plan, we will require
      additional financing. We cannot guaranty that such additional financing will
      be
      available. In the absence of additional financing we may be required to
      significantly reduce our operations.**





Our
      prospects must be considered speculative, considering the risks, expenses,
      and
      difficulties frequently encountered in the establishment of a new business,
      specifically the risks inherent in developmental stage companies. We expect
      to
      continue to incur significant operating and capital expenditures and, as a
      result, we expect significant net losses in the future. We cannot guaranty
      that
      we will be able to achieve profitable operations or, if profitability is
      achieved, that it will be maintained for any significant period, or at all.
      If
      we are unable to achieve profitable operations, investors will likely lose
      their
      entire investment.





42




We
      may
      not be successful in the implementation of our business strategy or our business
      strategy may not be successful, either of which will impede our development
      and
      growth. Our business strategy involves leveraging brand acceptance into
      profitable sales and licensing opportunities. Our ability to implement this
      business strategy is dependent on our ability to:




·
            Identify
                and engage additional business opportunities;


·
              Sell our products to end consumers;
 ·
              Establish brand recognition and
                  customer
                  loyalty; and
 ·
                Manage
                    growth in administrative overhead costs.


In
      assessing our ability to meet these challenges, a potential investor should
      take
      into account our lack of operating history and brand recognition, our
      significant losses since inception, our management’s relative inexperience, the
      competitive conditions existing in our industry and general economic conditions
      and consumer discretionary spending habits. Our growth is largely dependent
      on
      our ability to successfully implement our business strategy. Our revenues will
      be adversely affected if we fail to implement our business strategy or if we
      divert resources to a business strategy that ultimately proves unsuccessful.





Our
      continued development involves other significant risks, including but are not
      limited to:





·
            An
                unproven business model;


·
            Negative
                net cash flow since inception;


·
            High
                investments in product development and marketing programs.


·
            No
                guaranty of acceptance of our products and
                services.


·
            Changes
                in style and trends.


·
            Raw
                material shortages.


·
            Changes
                in consumer spending.





**We
      depend on independent manufacturers and suppliers of raw materials, which
      reduces our ability to control the manufacturing process, which could harm
      our
      sales, reputation and overall profitability.**





We
      depend
      on independent contract manufacturers and suppliers of raw materials to secure
      a
      sufficient supply of raw materials and maintain sufficient manufacturing and
      shipping capacity in an environment characterized by declining prices, labor
      shortage, continuing cost pressure and increased demands for product innovation
      and speed-to-market. This dependence could subject us to difficulty in obtaining
      timely delivery of products of acceptable quality. In addition, a contractor’s
      failure to ship products to us in a timely manner or to meet the required
      quality standards could cause us to miss the delivery date requirements of
      our
      customers. The failure to make timely deliveries may cause our customers to
      cancel orders, refuse to accept deliveries, impose non-compliance charges
      through invoice deductions or other charge-backs, demand reduced prices or
      reduce future orders, any of which could harm our sales, reputation and overall
      profitability.





**We
      do not have long-term contracts with any of our independent contractors and
      any
      of these contractors may unilaterally terminate their relationship with us
      at
      any time. While we believe there is an adequate supply of contractors to provide
      products and services to us, to the extent we are not able to secure or maintain
      relationships with independent contractors that are able to fulfill its
      requirements, our business would be harmed.**





43




We
      have
      initiated standards for our suppliers, and monitor our independent contractors’
compliance with applicable labor laws, but we do not control our contractors
      or
      their labor practices. The violation of federal, state or foreign labor laws
      by
      one of our contractors could result in us being subject to fines and our goods
      that are manufactured in violation of such laws being seized or their sale
      in
      interstate commerce being prohibited. To date, we have not been subject to
      any
      sanctions that, individually or in the aggregate, have had a material adverse
      effect on our business, and we are not aware of any facts on which any such
      sanctions could be based. There can be no assurance, however, that in the future
      we will not be subject to sanctions as a result of violations of applicable
      labor laws by our contractors, or that such sanctions will not have a material
      adverse effect on our business and results of operations.





**We
      have limited existing brand identity and customer loyalty; if we fail to develop
      and maintain our proposed brand, our business could suffer.**





The
      Company must establish a strong brand identity in order to be successful in
      a
      highly competitive environment. We have determined that there is an affinity
      to
      the term “WHITEBOY®” and MASH CULTURE LAB Ô within
      our targeted consumer groups, but this is no guaranty that the Company will
      be
      able to establish brand loyalty. Our targeted consumer must quickly identify
      the
      brand “WHITEBOY®” and MASH CULTURE LAB Ô with
      their corresponding logos and icons.





**We
      may not be able to operate profitably if we fail to anticipate and interpret
      fashion trends.**





We
      believe that our success depends in part on our ability to anticipate, gauge
      and
      respond to changing consumer demands and fashion trends in a timely manner.
      We
      propose to target the market of young people aged 13 through 29 who identify
      with the “urban” and/or “board” segments of that market. We cannot guaranty that
      we will be successful in anticipating consumer tastes and preferences. If we
      misjudge the market for our proposed line of clothing and accessories, we may
      be
      faced with a significant amount of unsold inventory, which could keep us from
      generating profits.





**Our
      inability to obtain sufficient financing will harm our development and growth
      strategy.**





We
      will
      require substantial amounts of working capital to fund our business and we
      cannot guaranty that additional financing will be available. We expect to
      require substantial additional capital to fund our development and operating
      expenses. We cannot be certain that any additional financing will be available
      to us on favorable terms when required, or at all. If we are unable to obtain
      sufficient additional capital when needed, we could be forced to alter our
      business strategy, delay or abandon some of our development plans or terminate
      our operations. In addition, if we raise additional funds through the issuance
      of equity, equity-linked or debt securities, such securities may have rights,
      preferences or privileges senior to those of the rights of our Common Stock
      and
      our stockholders may experience additional dilution.


We
      currently operate three principal brands, WHITEBOY® for men, WHITEBOY® for girls
      and MASH CULTURE LABTM. If we are unable to successfully market and distribute
      these brands, or if the recent popularity of “urban” and “board” related brands
      decreases, or if we are unable to execute on our multi-brand strategy to acquire
      and/or license additional companies and/or brands, as applicable, identified
      by
      our management from time to time, our results of operations and financial
      condition will be adversely affected.





44




**Our
      operating results may fluctuate significantly.**





Management
      expects that we will experience substantial variations in our net sales and
      operating results from quarter to quarter. We believe the factors that influence
      this variability of quarterly results include:





·
            the
                timing of our introduction of new product lines;


·
            general
                economic and industry conditions that affect consumer spending and
                retailer purchasing;


·
            the
                availability of manufacturing capacity;


·
            the
                seasonality of the markets in which we participate;


·
            the
                timing of trade shows;


·
            the
                product mix of customer orders;


·
            the
                timing of the placement or cancellation of customer orders;


·
            the
                weather;


·
            transportation
                delays;


·
            quotas
                and other regulatory matters;


·
            the
                occurrence of charge backs in excess of reserves; and


·
            the
                timing of expenditures in anticipation of increased sales and actions
                of
                competitors.





As
      a
      result of fluctuations in our revenue and operating expenses that may occur,
      management believes that period-to-period comparisons of our results of
      operations may not necessarily indicate future performance.





**The
      financial condition of our customers could affect our results of operations.**





Certain
      retailers, including some of our customers, have experienced in the past, and
      may experience in the future, financial difficulties, that increase the risk
      of
      extending credit to such retailers and the risk that financial failure will
      eliminate a customer entirely. These retailers have attempted to improve their
      own operating efficiencies by concentrating their purchasing power among a
      narrowing group of vendors. There can be no assurance that we will remain a
      preferred vendor for our existing customers. A decrease in business from or
      loss
      of a major customer could harm our results of operations. There can be no
      assurance that our factor will approve the extension of credit to certain retail
      customers in the future. If a customer’s credit is not approved by the factor,
      we could assume the collection risk on sales to the customer itself, require
      that the customer provide a letter of credit, or choose not to make sales to
      the
      customer.





**Our
      business is subject to risks associated with importing products.**





A
      portion
      of our import operations are subject to tariffs imposed on imported products
      and
      quotas imposed by trade agreements. In addition, the countries from which our
      products are imported may from time to time impose additional new duties,
      tariffs or other restrictions on its imports or adversely modify existing
      restrictions. Adverse changes in these import costs and restrictions, or our
      suppliers’ failure to comply with customs or similar laws, could harm our
      business. We cannot assure that future trade agreements will not provide our
      competitors with an advantage over us, or increase our costs, either of which
      could have an adverse effect on our business and financial condition.





**Our
      operations are also subject to the effects of international trade agreements
      and
      regulations such as the North American Free Trade Agreement, and the activities
      and regulations of the World Trade Organization.**





Generally,
      these trade agreements benefit our business by reducing or eliminating the
      duties assessed on products or other materials manufactured in a particular
      country. However, trade agreements can also impose requirements that adversely
      affect our business, such as limiting the countries from which we can purchase
      raw materials and setting duties or restrictions on products that may be
      imported into the United States from a particular country.





45




**Our
      ability to import raw materials in a timely and cost-effective manner may also
      be affected by problems at ports or issues that otherwise affect transportation
      and warehousing providers, such as labor disputes.**





These
      problems could require us to locate alternative ports or warehousing providers
      to avoid disruption to our customers. These alternatives may not be available
      on
      short notice or could result in higher transit costs, which could have an
      adverse impact on our business and financial condition.





**We
      may not be able to adequately protect our intellectual property rights.**





The
      loss
      of or inability to enforce our trademarks, including “WHITEBOY®” and MASH
      CULTURE LAB Ô or
      any of
      our other or future proprietary or licensed trademarks, designs, patents,
      know-how and trade secrets could adversely affect our business. If any third
      party copies or otherwise gains access to our trademarks or other proprietary
      rights, or develops similar products independently, it may be costly to enforce
      our rights and we would not be able to compete as effectively. Additionally,
      the
      laws of foreign countries may provide inadequate protection of intellectual
      property rights, making it difficult to enforce such rights in those countries.





**We
      may need to bring legal claims to enforce or protect our intellectual property
      rights.**





Any
      litigation, whether successful or unsuccessful, could result in substantial
      costs and diversions of resources. In addition, notwithstanding the rights
      we
      have secured in our intellectual property, third parties may bring claims
      against us alleging that we have infringed on their intellectual property rights
      or that our intellectual property rights are not valid. Any claims against
      us,
      with or without merit, could be time consuming and costly to defend or litigate
      and therefore could have an adverse affect on our business.





**The
      loss of our designers and creative staff would harm our future development
      and
      could significantly impair our ability to achieve our business objectives.**





Our
      success is largely dependent upon the expertise and knowledge of our management
      and our principal creative staff, and our ability to continue to hire and retain
      other key personnel. The loss of any of our key personnel could have a material
      adverse effect on our business, development, financial condition, and operating
      results. We do not maintain “key person” life insurance on any of our management
      or key personnel.





**RISKS
      RELATED TO OUR INDUSTRY**





**Our
      sales are heavily influenced by general economic cycles.**





Apparel
      is a cyclical industry that is heavily dependent upon the overall level of
      consumer spending. Purchases of apparel and related goods tend to be highly
      correlated with cycles in the disposable income of our consumers. Our customers
      anticipate and respond to adverse changes in economic conditions and uncertainty
      by reducing inventories and canceling orders. As a result, any substantial
      deterioration in general economic conditions, increases in interest rates,
      acts
      of war, terrorist or political events that diminish consumer spending and
      confidence in any of the regions in which we compete, could reduce our sales
      and
      adversely affect our business and financial condition.





46




**The
      apparel industry is highly competitive.**





We
      face a
      variety of competitive challenges including:





·
            anticipating
                and quickly responding to changing consumer demands;


·
            developing
                innovative, high-quality products in sizes and styles that appeal
                to
                consumers;


·
            competitively
                pricing our products and achieving customer perception of value;
                and


·
            the
                need to provide strong and effective marketing support.





**We
      must successfully gauge fashion trends and changing consumer preferences to
      succeed.**





Our
      success is largely dependent upon our ability to gauge the fashion tastes of
      our
      customers and to provide merchandise that satisfies retail and customer demand
      in a timely manner. The apparel business fluctuates according to changes in
      consumer preferences dictated in part by fashion and season. To the extent
      we
      misjudge the market for our merchandise, our sales may be adversely affected.
      Our ability to anticipate and effectively respond to changing fashion trends
      depends in part on our ability to attract and retain key personnel in our
      design, merchandising and marketing staff. Competition for these personnel
      is
      intense, and we cannot be sure that we will be able to attract and retain a
      sufficient number of qualified personnel in future periods.





**Our
      business may be subject to seasonal trends.**





In
      the
      experience of our management, operating results in the targeted apparel industry
      in which we operate have been subject to seasonal trends when measured on a
      quarterly basis. This trend is dependent on numerous factors, including:




·
            trends
                among young shoppers;


·
            holiday
                seasons;


·
            climate;


·
            economic
                conditions; and


·
            numerous
                other factors beyond our control.




**Distributors
      may not accept our merchandise.**





In
      order
      to generate sales of our proposed apparel and accessory lines, we need to
      develop relationships with clothing manufacturers and distributors, and
      establish channels of distribution. We cannot guaranty that we can establish
      distribution in key locations through retail distributors of specialty shops
      and
      through chain stores. It is uncertain that our fashions or any new products
      or
      collections that we may add in the future will achieve success or profitability.
      Introducing new collections and products under a private label generally entails
      relatively high start-up costs and inefficiencies in producing, distributing,
      and marketing the initial limited quantities of such products. However, due
      to
      inefficiencies associated with operating a private label, we may not be able
      to
      obtain a sufficient inventory in these products. We cannot guaranty that any
      collection or product which we may introduce will achieve profitable sales
      levels. Expanding our operations or lines of merchandise also could require
      capital greater than our cash flow or available credit resources.




47




**Our
      success depends on our ability to attract and retain high quality management
      and
      independent contractors.**





We
      face
      significant competition in the recruitment of qualified employees. We also
      rely
      on the services of independent contractors for production and some our
      marketing, advertising and public relations programs. Our business may suffer
      if
      we are unable to recruit or retain a sufficient number of qualified employees,
      the costs of employee compensation or benefits increase substantially or the
      costs of outsourcing certain tasks to third party providers increase
      substantially. In addition, we will likely expend resources in training new
      employees and should we experience a high turnover during the course of our
      business, we may incur additional recruiting and training costs and our business
      may suffer.





**Our
      Articles of Incorporation and our Bylaws limit the liability of our officers
      and
      directors and include a provision eliminating or limiting the personal liability
      of our directors to the Company and its shareholders for damages for breach
      of
      fiduciary duty as a director.**





Moreover,
      the Corporation Code of Nevada provides for the indemnification, under certain
      circumstances, of officers and directors. Accordingly, directors may have no
      liability to our shareholders for any mistakes or errors of judgment or for
      any
      act of omission, unless such act or omission involves intentional misconduct,
      fraud, or a knowing violation of law or results in unlawful distributions to
      our
      shareholders.





We
      do not
      anticipate paying dividends on our Common Stock in the foreseeable future;
      but,
      rather, we plan to retain earnings, if any, for the operation and expansion
      of
      our business.





RISKS
      RELATED TO OUR SECURITIES





**A
      purchase of our Common Stock is speculative and involves significant risks.**





The
      Common Stock should not be purchased by any person who cannot afford the loss
      of
      his or her entire purchase price for the Common Stock. A purchase of the Common
      Stock would be “unsuitable” for a person who cannot afford to lose his or her
      entire purchase price for the Common Stock.





**Our
      Common Stock is currently listed for trading on the OTC Bulletin Board
      maintained by the National Association of Securities Dealers, Inc.**





Our
      Common Stock is thinly traded, meaning the number of persons interested in
      purchasing our shares at or near ask prices at any given time may be relatively
      small or non-existent. This situation is attributable to a number of factors,
      including the fact that we have a small number of freely tradable shares, and
      we
      are a small public company that is relatively unknown to stock analysts, stock
      brokers, institutional investors and others in the investment community that
      generate or influence sales volume, and that even if we came to the attention
      of
      such persons, they tend to be risk-averse and would be reluctant to follow
      a
      company of our size that is expanding into a related but new line of business
      as
      we are, or purchase or recommend the purchase of our shares until such time
      as
      we became more seasoned and proven. As a consequence, there may be periods
      when
      trading activity in our shares is minimal or non-existent, as compared to a
      seasoned issuer which has a large and steady volume of trading activity that
      will generally support continuous sales without an adverse effect on share
      price. We cannot give any assurance that a broader or more active public trading
      market for our Common Stock will develop or be sustained, or that current
      trading levels will be sustained. Due to these conditions, we give no assurance
      that shareholders will be able to sell shares at or near ask prices or at all
      if
      you need money or otherwise desire to liquidate your shares.





48




**If
      securities or industry analysts do not publish research reports about our
      business, our stock price and trading volume could decline.**





Small,
      relatively unknown public companies can achieve visibility in the trading market
      through research and reports that industry or securities analysts publish.
      However, to our knowledge, no analysts routinely cover our company. The lack
      of
      published reports by independent securities analysts could limit the interest
      in
      our stock and negatively affect our stock price. We have no control over
      research and reports these analysts publish or whether they will be published
      at
      all. If any analyst who does cover us downgrades our stock, our stock price
      could decline. If any analyst initiates and then ceases coverage of our company
      or fails to regularly publish reports on us, we could lose visibility in the
      financial markets or never achieve such visibility, which in turn could cause
      our stock price or trading volume to stagnate or decline.





**Shareholders
      may have difficulty selling our shares because they are deemed "penny stocks."**





Since
      our
      Common Stock is not listed on the Nasdaq Stock Market or any national securities
      exchange, if the trading price of our Common Stock is below $5.00 per share,
      trading in our Common Stock will be subject to the requirements of certain
      rules
      promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
      Act"). These rules require additional disclosures by broker-dealers in
      connection with any trades involving a stock defined as a penny stock. Such
      rules require the delivery, prior to any penny stock transaction, of a
      disclosure schedule explaining the penny stock market and the risks associated
      therewith and impose various sales practice requirements on broker-dealers
      who
      sell penny stocks to persons other than established customers and accredited
      investors (generally defined as an investor with a net worth in excess of
      $1,000,000 or annual income exceeding $200,000 individually or $300,000 together
      with a spouse). For these types of transactions, the broker-dealer must make
      a
      special suitability determination for the purchaser and have received the
      purchaser's written consent to the transaction prior to the sale. The
      broker-dealer also must disclose the commissions payable to the broker-dealer,
      current bid and offer quotations for the penny stock and, if the broker-dealer
      is the sole market maker, the broker-dealer must disclose this fact and the
      broker-dealer's presumed control over the market. Such information must be
      provided to the customer orally or in writing before or with the written
      confirmation of trade sent to the customer. Monthly statements must be sent
      disclosing recent price information for the penny stock held in the account
      and
      information on the limited market in penny stocks. The additional burdens
      imposed upon broker-dealers by such requirements could discourage broker-dealers
      from effecting transactions in our common stock, which could severely limit
      the
      market liquidity of the common stock and the ability of holders of the common
      stock to sell their shares.





**The
      market price of our Common Stock may be adversely affected by market volatility.**





The
      market price of our Common Stock is likely to be volatile and could fluctuate
      widely in response to many factors, including:





·
            announcements
                of the results of our operations or the operations of our competitors,


·
            developments
                with respect to intellectual property rights,


·
            announcements
                of technological innovations by us or our competitors,




49




·
            announcements
                of new services, products or new contracts by us or our competitors,


·
            actual
                or anticipated variations in our operating results due to the level
                of
                development expenses and other factors,


·
            changes
                in financial estimates by securities analysts and whether our earnings
                meet or exceed such estimates,


·
            conditions
                and trends in the online digital music distribution or production
                industries,


·
            new
                accounting standards,


·
            general
                economic, political and market conditions and other factors, and





-
      the
      occurrence of any of the risks described in this Report.




**We
      cannot control many of these factors, and we believe that period-to-period
      comparisons of our financial results will not necessarily be indicative of
      our
      future performance.**





In
      addition, the stock market in general, and the market for apparel companies
      in
      particular, has experienced extreme price and volume fluctuations that may
      have
      been unrelated or disproportionate to the operating performance of individual
      companies. These broad market and industry factors may seriously harm the market
      price of our Common Stock, regardless of our operating performance.





**DISCLOSURE
      OF OPINION OF SECURITIES AND EXCHANGE COMMISSION REGARDING INDEMNIFICATION
      FOR
      SECURITIES ACT LIABILITIES**





Insofar
      as indemnification for liabilities resulting from violations of the Securities
      Act of 1933 may be permitted to our directors, officers or controlling persons
      pursuant to the foregoing provisions, we have been informed that in the opinion
      of the Securities and Exchange Commission such indemnification is against public
      policy as expressed in the Securities Act of 1933 and is, therefore,
      unenforceable.





Our
      ability to succeed will depend on the ability of our management to control
      costs. We have used reasonable efforts to assess and predict costs and expenses
      based on experience of our management. However, we have a short operating
      history upon which to base predictions. Implementing our business plan may
      require more employees, equipment, supplies or other expenditure items than
      we
      have predicted. Similarly, the cost of compensating additional management,
      employees and consultants or other operating costs may be more than our
      estimates, which could result in sustained losses.


50


**ITEM
      3. CONTROLS AND PROCEDURES**





The
      Company maintains disclosure controls and procedures (as defined in Exchange
      Act
      Rule 13a-15(e)) that are designed to assure that information required to be
      disclosed in its Securities Exchange Act of 1934 reports is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission's rules and forms, and that such information is accumulated
      and communicated to management, including the Chief Executive Officer and Chief
      Financial Officer, as appropriate, to allow timely decisions regarding required
      disclosures.





In
      designing and evaluating the disclosure controls and procedures, management
      recognizes that any controls and procedures, no matter how well designed and
      operated, can provide reasonable assurance only of achieving the desired control
      objectives, and management necessarily is required to apply its judgment in
      weighting the costs and benefits of possible new or different controls and
      procedures. Limitations are inherent in all control systems, so no evaluation
      of
      controls can provide absolute assurance that all control issues and any fraud
      within the company have been detected.





As
      required by Exchange Act Rule 13a-15(b), as of the end of the period covered
      by
      this report the Company, under the supervision and with the participation of
      our
      Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
      of the Company's disclosure controls and procedures. Based on this evaluation,
      our Chief Executive Officer and Chief Financial Officer concluded that the
      Company's disclosure controls and procedures were effective in
      ensuring that information required to be disclosed by us in our periodic reports
      is recorded, processed, summarized and reported, within the time periods
      specified for each report and that such information is accumulated and
      communicated to our management, including our principal executive and principal
      financial officers, or persons performing similar functions, as appropriate
      to
      allow timely decisions regarding required disclosure.




Other
      than the hiring of a Vice-President of Finance to help improve the Company’s
      internal controls over financial reporting, there have been no other significant
      changes in our internal controls or in other factors that could significantly
      affect those controls subsequent to the date of their last valuation.




51


**PART
      II — OTHER INFORMATION**





**Item
      1. Legal Proceedings**





The
      Company is periodically involved in legal actions and claims that arise as
      a
      result of events that occur in the normal course of operations. The Company
      is
      not currently aware of any formal legal proceedings or claims that the Company
      believes will have, individually or in the aggregate, a material adverse effect
      on the Company's financial position or results of operations.





**Item
      2. Unregistered Sales of Equity Securities**





In
      the
      three month period ending September 30, 2006, the Company issued unsecured
      promissory notes in the aggregate principal amount of $550,000 (the Notes)
      and
      warrants to purchase the Company's common stock (the Warrants) to accredited
      investors. The Notes bear interest at a rate of 10%, subject to repayment at
      the
      earlier of one year or the Company’s consummation of a financing of not less
      than $4,000,000, and are convertible into 2,200,000 shares of the Company's
      common stock at a conversion price of $0.25 per share. The
      securities were offered and sold to the investors in a private placement
      transaction made in reliance upon exemptions from registration pursuant to
      Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated
      thereunder.   The investors are accredited investors as defined in
      Rule 501 of Regulation D promulgated under the Securities Act of
      1933.





In
      the three month period ending September 30, 2006, the Company issued
      unsecured promissory notes in the aggregate principal amount of $300,000 (the
      Notes) and warrants to purchase the Company's common stock (the Warrants) to
      accredited investors. The Notes bear interest at a rate of 10%, plus a 15%
      bridge fee, and due on January 2, 2007. The associated Warrants are exercisable
      for 375,000 shares of common stock at an exercise price of $0.40 per share. The
      securities were offered and sold to the investors in a private placement
      transaction made in reliance upon exemptions from registration pursuant to
      Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated
      thereunder. The investors are accredited investors as defined in Rule 501
      of Regulation D promulgated under the Securities Act of 1933.





In
      the
      three month period ending September 30, 2006, the Company issued warrants
      convertible into 1,850,000 shares of its common stock in connection
      with a deferred financing arrangement. The exercise price of these
      warrants was $0.50  per share. The
      securities were offered and sold to the investors in a private placement
      transaction made in reliance upon exemptions from registration pursuant to
      Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated
      thereunder.   The investors are accredited investors as defined in
      Rule 501 of Regulation D promulgated under the Securities Act of
      1933.





In
      the
      three month period ending September 30, 2006, convertible note holders converted
      $54,935, consisting of $48,000 of principal, and $6,935 of accrued interest
      into
      219,740 shares of common stock converted at $0.25.





On
      November 8, 2006, the Company issued a subordinated promissory note with an
      accredited investor in the amount of $500,000, with interest payable at 8%,
      with
      a maturity date of August 6, 2007. In connection with this transaction, the
      Company also issued 3 year warrants to purchase 2,500,000 shares of the
      Company’s common stock at an exercise price of $0.40 per share. The
      securities were offered and sold to the investors in a private placement
      transaction made in reliance upon exemptions from registration pursuant to
      Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated
      thereunder.   The investors are accredited investors as defined in
      Rule 501 of Regulation D promulgated under the Securities Act of
      1933.





52




**Item
      3. Defaults Upon Senior Securities**





None.





**Item
      4. Submission of Matters to a Vote of Security Holders**





None.





**Item
      5. Other Information**





In
      November 2006, the Company issued a subordinated promissory note with an
      accredited investor in the amount of $500,000, with interest payable at 8%,
      with
      a maturity date of August 6, 2007. In connection with this transaction, the
      Company issued 3 year warrants to purchase 2,500,000 shares of the Company’s
      common stock at an exercise price of $0.40 per share. The
      securities were offered and sold to the investors in a private placement
      transaction made in reliance upon exemptions from registration pursuant to
      Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated
      thereunder.   The investors are accredited investors as defined in
      Rule 501 of Regulation D promulgated under the Securities Act of
      1933.





**Item
      6. Exhibits**





(a)
      Exhibits




4.1
            Form
                of promissory notes for convertible financing and warrants for $550,000,
                July - August, 2006 (incorporated by reference to Form 8-K filed
                with the
                Securities and Exchange Commission on August 10, 2006)4.2
            Form
                of promissory notes for non-convertible financing and warrants for
                $300,000, August - September 2006 (incorporated by reference Form
                8-K
                filed with the Securities and Exchange Commission on September 29,
                2006)4.3
            Form
                of Warrants for Deferred Financing on August 31, 20064.4
            Form
                of Promissory Note for $500,000 financing on November 8,
                20064.5
            Form
                of Warrant for $500,000 financing on November 8, 200631.1
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act31.2
            Certification
              of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
              Act32.1
            Certification
              of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
              Act32.2
            Certification
              of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
              Act




53





SIGNATURES





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.





Date:
      November 20, 2006




**Sub-Urban
                Brands, Inc.**By:
            /s/
                Joseph Shortal
            
            
            By:
            /s/
                Jack MottJoseph
                Shortal, Chief Executive Officer
            
            
            
            Jack
                Mott, Chief Financial Officer, Chief Operating OfficerPrincipal
                Executive Officer
            
            
            
            Principal
                Financial and Accounting Officer




54


INDEX
      TO
      EXHIBITS





**Exhibit
              Number**
            
            **Description**4.1
            
            Form
              of promissory notes for convertible financing and warrants for $550,000,
              July - August, 2006 (incorporated by reference to Form 8-K filed with
              the
              Securities and Exchange Commission on August 10, 2006)4.2
            
            Form
              of promissory notes for non-convertible financing and warrants for
              $300,000, August - September 2006 (incorporated by reference Form 8-K
              filed with the Securities and Exchange Commission on September 29,
              2006)4.3
            
            Form
                of Warrants for Deferred Financing on August 31, 20064.4
            
            Form
                of Promissory Note for $500,000 financing on November
                8, 20064.5
            
            Form
                of Warrant for $500,000 financing on November
                8, 200631.1
            
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act31.2
            
            Certification
              of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
              Act32.1
            
            Certification
              of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
              Act32.2
            
            Certification
              of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
              Act




55